A Project Requires an Initial Investment in Equipment of $90,000

question 51

Multiple Choice

A project requires an initial investment in equipment of $90,000 and then requires an investment in working capital of $10,000 at the beginning (t = 0) . The project is expected to produce sales revenues of $120,000 for three years. Manufacturing costs are estimated to be
60% of the revenues. The assets are depreciated using straight-line depreciation. At the end of the project, the firm can sell the equipment for $10,000. The corporate tax rate is 30% and the cost of capital is 15%. Calculate the NPV of the project:

• A) 3840
• B) 8443
• C) -2735
• D) None of the above

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Definitions:

Relay Station

A term often used in neuroscience to describe regions or structures in the nervous system that transfer information from one area to another.

Thalamus

a structure in the brain that acts as a relay station for sensory signals to the cerebral cortex.

Neurotransmitters

Chemical messengers in the brain and body that transmit signals across synapses from one neuron to another.

Schizophrenia

An emotional and cognitive ailment defined by alterations in thought patterns, interpretation of stimuli, feelings, and the ability to relate socially.