$$\text { Reference: } 10 - 09$$ Lambert Manufacturing Has $120,000 to Invest in Either Project a $120,000

question 13

Multiple Choice

$$\text { Reference: } 10 - 09$$ Lambert Manufacturing has $120,000 to invest in either Project A or Project B. The following data are available on these projects: $$\begin{array} { | l | l | l | } \hline & \text { Project } A & \text { Project } B \\\hline \text { Cost of equipment needed now } & \$ 120,000 & \$ 70,000 \\\hline \text { Working capital investment needed now } & - & \$ 50,000 \\\hline \text { Annual net operating cash inflows } & \$ 50,000 & \$ 45,000 \\\hline \text { Salvage value of equipment in 6 years } & \$ 15,000 & - \\\hline\end{array}$$ Both projects have a useful life of 6 years. At the end of 6 years, the working capital investment will be released for use elsewhere. Lambert's discount rate is 14%.
-The net present value of Project A is closest to?

• A)$82,241.
• B)$67,610.
• C)$81,290.
• D)$74,450.

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Definitions:

Product Life Cycle

The cycle through which every product goes from introduction to withdrawal or eventual demise, including stages of growth, maturity, and decline.

Total Industry Sales

The aggregate revenue generated from all sales within a particular industry over a specific period.

Marginal Competitors

Firms that operate on the fringes of an industry with minimal market share and influence.

Repeat Purchasers

Customers who buy a product or service more than once, indicating loyalty or satisfaction with the product or service.