Compute the NPV Statistic for Project U Given the Following

question 28

Multiple Choice

Compute the NPV statistic for Project U given the following cash flows if the appropriate cost of capital is 9 percent.
Project U
$$\begin{array} { l l l l c c c c } \text { Time } & 0 & 1 & 2 & 3 & 4 & 5 \\\text { Cash Flow } & - \$ 1,000 & \$ 350 & \$ 1,480 & - \$ 520 & \$ 400 & - \$ 100\end{array}$$

• A) $201.69
• B) $273.82
• C) $383.63
• D) $397.21

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Definitions:

Negative Returns

A situation in which additional investment or effort results in a decrease in output or performance, contrary to typical expectations for growth or improvement.

Marginal Cost

The additional expenditure involved in producing one further unit of a product or service.

Fixed Cost

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance expenses.

Variable

An element, feature, or factor that is liable to vary or change; used in statistical analysis and experiments.