A Project Will Produce an Operating Cash Flow of $7,300

question 188

Multiple Choice

A project will produce an operating cash flow of $7,300 a year for three years. The initial cash investment in the project will be $11,601. The net after-tax salvage value is estimated at $3,500 and will be received during the last year of the project's life. What is the net present value of the project if the required rate of return is 11%?

• A) $8,798.29
• B) $9,896.87
• C) $10,072.72
• D) $13,353.41
• E) $20,398.29

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Definitions:

Dispose

The act of selling, transferring, or getting rid of an asset or property.

Property

Assets or rights owned by individuals or entities, which can be tangible or intangible, and are subject to ownership claims.

Lifetime

The period during which something is functional, active, or intended to last.

Fixture

An item of personal property that has been attached to or closely associated with real property in such a way that it becomes legally part of the real property.