Your Boss Asked You to Evaluate a Project with an Infinite

question 13

Multiple Choice

Your boss asked you to evaluate a project with an infinite life. Sales and costs project to $1,000 and $500 per year, respectively. (Assume sales and costs occur at the end of the year [i.e., profit of $500 at the end of year one]) . There is no depreciation and the tax rate is 21 percent. The real required rate of return is 10 percent. The inflation rate is 4 percent and is expected to be 4 percent forever. Sales and costs will increase at the rate of inflation. If the project costs $3,000, what is the NPV?

• A)$950.00
• B)$1,629.62
• C)$365.38
• D)$472.22

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Definitions:

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A developmental stage where an individual is unable to differentiate between their own perspective and that of others, often seen in children.