Crispen Corporation Can Invest in a Project That Costs $400,000

question 6

Multiple Choice

Crispen Corporation can invest in a project that costs $400,000.The project is expected to have an after-tax return of $250,000 in each of years 1 and 2.Crispen normally uses a 10 percent discount rate to evaluate projects but feels it should use 12 percent to compensate for inflation.How much difference does the rate make in the after-tax net present value of the project?

• A)$50,000
• B)$22,500
• C)$20,000
• D)$11,250

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Definitions:

Field-wound Motors

Electric motors where the magnetic field is generated by winding wire around a core to create electromagnets, typically adjustable for speed control.

Efficiency

The ratio of useful output of a system to its total input, often expressed as a percentage, indicating how well the system converts input energy into output work or desired form of energy.

Series Motor

A motor that contains only a series field winding.

No Load

A condition where a power source or device is operating without any load or consumption, indicating its behavior in an ideal or unloaded state.