A Project Manager Is Using the Net Present Value Method

question 90

Multiple Choice

A project manager is using the net present value method to make the final decision on which project to undertake.The company has a 10% required rate of return and expects a 4% rate of inflation for the following five years.What is the NPV of a project that has cash flows as shown in the table?

• A)$264,252
• B)$324,606
• C)$442,242
• D)$398,780

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Definitions:

Standard Price

A predetermined cost or selling price of a product or service, often used in budgeting and accounting to measure variances in actual cost or price.

Direct Materials

Raw materials directly used in the manufacturing of a product, easily traceable to the finished product.

Purchasing Department

A division within a business that is responsible for acquiring goods, services, and materials necessary for the company's operations.

Fixed Factory Overhead Volume Variances

The difference between the budgeted and the actual volume of production, affecting the fixed factory overhead costs.