Calculate the NPV of a 20-Year Project with a Cost

question 96

Multiple Choice

Calculate the NPV of a 20-year project with a cost of $400,000 and annual cash flows of $50,000 in years 1-10 and $25,000 in years 11-20. The company's required rate of return is 10%.

• A) ($33,547)
• B) ($18,547)
• C) $0
• D) $18,547
• E) $33,547

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Definitions:

Tenant Farmers

Individuals who rent land to farm from a landlord.

Economic Rent

Extra income earned by a factor of production (like land or labor) due to its relatively fixed supply, exceeding what is economically necessary to bring it into use.

Landowners

Individuals or entities that hold legal title or ownership of land.

Pure Economic Rent

The income derived from the inherent value of a natural resource or location, excluding any income attributed to improvements or human intervention.