An Investor Is Considering a Project That Will Generate $800,000

question 42

Multiple Choice

An investor is considering a project that will generate $800,000 per year for four years. In addition to upfront costs, at the completion of the project at the end of the fifth year there will be shut-down costs of $500,000. If the cost of capital is 5%, based on the MIRR, at what upfront costs does this project cease to be worthwhile?

• A) $2.84 million
• B) $2.32 million
• C) $2.58 million
• D) $2.44 million

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Definitions:

Number Of Suppliers

This refers to the total count of individual suppliers that a business sources its materials, goods, or services from.

Landed Costs

The total price of a product once it has arrived at a buyer's doorstep, including the purchase price, transportation fees, customs, duties, and other taxes.

Sales/FOB Terms

Terms used in international trade to define when and where the responsibility and ownership of goods are transferred from the seller to the buyer; "FOB" stands for Free On Board.

Commodities

Basic goods used in commerce that are interchangeable with other goods of the same type, typically used as inputs in the production of other goods or services.