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:

Normally-Open

A contact configuration in switches or relays that is open (non-conducting) when at rest, closing only when activated.

Contactor

An electrically controlled switch used for switching an electrical power circuit, commonly used in motor control applications.

Start Pushbutton

A button that, when pressed, initiates the operation of a machine or device, commonly found in motor control circuits to start motors.

Control Circuit

An electrical circuit designed to control the operation of devices in a system, often through the use of relays, switches, and timers.