A Project Will Produce Operating Cash flOws of €45,000 a Year

question 36

Multiple Choice

A project will produce operating cash flows of €45,000 a year for four years.During the life of the project, inventory will be lowered by €30,000 and trade receivables will increase by €15,000.Trade
Payables will decrease by €10,000.The project requires the purchase of equipment at an initial cost
Of €120,000.The equipment will be depreciated straight-line to a zero book value over the life of
The project.The equipment will be salvaged at the end of the project creating a €25,000 after-tax
Cash flow.At the end of the project, net working capital will return to its normal level.What is the net
Present value of this project given a required return of 14%?

• A)€3,483.48
• B)€16,117.05
• C)€27,958.66
• D)€32,037.86
• E)€49,876.02

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Definitions:

Muscle Tissue

A type of tissue composed of fibers capable of contracting to effect bodily movement.

Adipocytes

These are fat cells in the body that store energy in the form of lipids.

Adipose Tissue

Adipose tissue is a type of body fat or connective tissue primarily composed of adipocytes, used for the storage of energy and as insulation and cushioning for the body.

Protective Cushion

A safeguarding structure or material that mitigates impact or pressure, often found in biological contexts like the pads of tissue that protect underlying organs.