Margarite's Enterprises Is Considering a New Project

question 26

Multiple Choice

Margarite's Enterprises is considering a new project.The project will require €325,000 for new non- current assets, €160,000 for additional inventory and €35,000 for additional trade receivables.
Short-term debt is expected to increase by €100,000 and long-term debt is expected to increase by
€300,000.The project has a 5-year life.The non-current assets will be depreciated straight-line to a
Zero book value over the life of the project.At the end of the project, the non-current assets can be
Sold for 25% of their original cost.The net working capital returns to its original level at the end of
The project.The project is expected to generate annual sales of €554,000 and costs of €430,000.
The tax rate is 35% and the required rate of return is 15%.What is the initial cost of this project?

• A)€325,000
• B)€420,000
• C)€425,000
• D)€520,000
• E)€620,000

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Definitions:

LSD

Lysergic acid diethylamide, a powerful hallucinogenic drug known for its psychological effects, which may include altered awareness of surroundings, perceptions, and feelings as well as sensations and images that seem real though they are not.

Covalent Bonds

Atomic bonds created through the mutual sharing of pairs of electrons among atoms.

VSEPR

A model used in chemistry to predict the geometry of individual molecules from the number of electron pairs surrounding their central atoms.

Lewis Structures

Diagrammatic methods for representing the bonds between atoms in a molecule and the lone pairs of electrons that may exist.