Twin Hills Inc

question 22

Multiple Choice

Twin Hills Inc. is considering a proposed project. Given available information, it is currently estimated that the proposed project is risky but has a positive net present value. Which of the following factors would make the company less likely to adopt the current project?

• A) It is revealed that if the company proceeds with the proposed project, the company will lose two other accounts, both of which have positive NPVs.
• B) It is revealed that the company has an option to back out of the project 2 years from now, if it is discovered to be unprofitable.
• C) It is revealed that if the company proceeds with the project, it will have an option to repeat the project 4 years from now.
• D) Answers a and b are correct.
• E) Answers b and c are correct.

Understand the concept and calculation of net present value (NPV) for project investment decisions.

Analyze the effects of taxes on project cash flows and valuation.

Assess the impact of project risks and operational changes on project valuation.

Identify and calculate the tax implications of selling or disposing of assets.

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