A Project Has an Initial Investment of $150

question 38

Multiple Choice

A project has an initial investment of $150. You have come up with the following estimates of revenues and costs. Calculate the NPV assuming that cash flow and perpetuities. (No taxes.) (Cost of capital = 10%)

• A) 50, -100, +400
• B) -50, +300, +500
• C) -100, +150, +350
• D) None of the above

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Definitions:

Warehouse Financing

A form of financing used by banks and other institutions to loan money to companies using inventory as collateral.

Trust Receipt

A trust receipt is a financial document issued by a bank to a buyer who has obtained a loan to purchase goods, where the buyer agrees to hold the goods in trust for the bank until the loan is repaid.

Inventory Loans

Short-term loans or lines of credit secured by a company’s inventory, used to purchase products for sale.

Factoring Accounts Receivable

A financial transaction where a business sells its accounts receivable to a third party at a discount to immediately raise cash.