A Project Requires an Initial Investment in Equipment of $90,000

question 39

Multiple Choice

A project requires an initial investment in equipment of $90,000 and then requires an initial investment in working capital of $10,000 (at t = 0) . You expect the project to produce sales revenue of $120,000 per year for three years. You estimate manufacturing costs at 60 percent of revenues. (Assume all revenues and costs occur at year-end [i.e., t = 1, t = 2, and t = 3]) . The equipment depreciates using straight-line depreciation over three years. At the end of the project, the firm can sell the equipment for $10,000. The corporate tax rate is 21 percent and the cost of capital is 16.5 percent. Calculate the NPV of the project.

• A)$9,826
• B)$3,840
• C)-$2,735
• D)$4,848

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Definitions:

Complex Expressions

In programming and mathematics, expressions that contain multiple operations and variables to represent complicated computations.

Compare Instructions

Instructions in programming that are used to compare two values and determine the relationship (equal, greater than, or less than) between them.

GRT Instruction

An instruction in programming languages, such as ladder logic for PLCs, that stands for "greater than" when comparing two values.