What Is the Net Present Value of a Project That

question 101

Multiple Choice

What is the net present value of a project that requires a net investment of $76,000 and produces net cash flows of $22,000 per year for 7 years? Assume the cost of capital is 15%.

• A) $91,520
• B) $15,520
• C) $78,000
• D) $167,474

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Definitions:

Inferior Goods

Goods for which demand decreases as the income of the consumer increases, as they are typically replaced with more expensive alternatives.

Substitute Goods

Products or services that can replace each other in use or consumption, leading to a choice between them based on price, preference, or other factors.

Normal Goods

Goods for which demand increases as the income of the consumer increases, and falls when the consumer's income decreases.

Cross Elasticity of Demand

measures how the quantity demanded of one good responds to a change in the price of another good, indicating substitutes or complements.