A Project Has the Following Cash Flows: C₀ = −100,000;

question 47

Multiple Choice

A project has the following cash flows: C₀ = −100,000; C₁ = 50,000; C₂ = 150,000; C₃ = 100,000. If the discount rate changes from 12 percent to 15 percent, what is the CHANGE in the NPV of the project (approximately) ?

• A)12,750 increase
• B)12,750 decrease
• C)14,240 increase
• D)14,240 decrease

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Definitions:

Average Collection Period

The typical timeframe a firm needs to gather payments from sales made on credit, showcasing how efficient its credit and collection procedures are.

Total Current Assets

The aggregate amount of all current assets on a company’s balance sheet, which are expected to be converted into cash within one fiscal year.

Receivable Turnover

A measure of how quickly a company collects cash from its accounts receivable, typically calculated as net credit sales divided by average accounts receivable.

Inventory Turnover

A ratio showing how many times a company's inventory is sold and replaced over a period, indicating the efficiency in managing and selling goods.