Story Company Is Investing in a Giant Crane

question 17

Multiple Choice

Story Company is investing in a giant crane. It is expected to cost 6.0 million in initial investment and it is expected to generate an end of year cash flow of 3.0 million each year for three years. Calculate the NPV at 12% (approximately) .

• A) 2.4 million
• B) 1.2. million
• C) 0.80 million
• D) 0.20 million

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Definitions:

Collateral Promises

Agreements that are secondary to a primary transaction or promise, often requiring the backup of an asset as security.

One-Year Rule

A legal provision in contract law stating that contracts which cannot be performed within one year must be in writing to be enforceable.

Oral Contract

An agreement between parties that is spoken, not written, but is still legally binding.

Milkshake Mixer

A kitchen appliance designed specifically for blending and mixing milkshake ingredients to create a smooth, evenly mixed beverage.