Consider a Capital Expenditure Project That Has Forecasted Revenues Equal

question 60

Multiple Choice

Consider a capital expenditure project that has forecasted revenues equal to $32,000 per year; cash expenses are estimated to be $29,000 per year. The cost of the project equipment is $23,000, and the equipment's estimated salvage value at the end of the project is $9,000. The equipment's $23,000 cost will be depreciated on a straight-line basis to $0 over a 10-year estimated economic life. Assume that the project requires an initial $7,000 working capital investment. The company's marginal tax rate is 30%. Calculate the project's net present value using a 12% discount rate.

• A) about -$10,610
• B) about -$12,530
• C) about -$9,954
• D) about +$9,462

Apply the theory of comparative advantage to solve problems related to international trade.

Understand and calculate terms of trade and its significance in international trade agreements.

Distinguish between the roles of comparative advantage and absolute advantage in international specialization and trade.

Recognize the contributions of key economists to the theory of comparative advantage.

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