Music Company Is Considering Investing in a New Project

question 36

Multiple Choice

Music Company is considering investing in a new project.The project will need an initial investment of $2,400,000 and will generate $1,200,000 (after-tax) cash flows for three years.Calculate the NPV for the project if the cost of capital is 15%.

• A)$169,935
• B)$1,200,000
• C)$339,870
• D)$125,846

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Definitions:

Capital Budgeting

The process a business undergoes to evaluate and prioritize investments in long-term assets.

Long-Term Investments

Assets or securities that are held for an extended period, typically over one year, for capital growth or income generation.

Planning

The process of making plans for something, including setting goals, defining actions to achieve the goals, and mobilizing resources to execute the actions.

Managing

The process of directing, controlling, and administrating an organization or effort towards achieving a set goal.