A Four-Year Project Has an Initial Outlay of $100,000

question 353

Multiple Choice

A four-year project has an initial outlay of $100,000. The future cash inflows from its project are $50,000 for years one and two and $40,000 for years three and four. Given a discount rate of 10%,
Will the project be accepted?

• A) Accept the project as the NPV is $44,150.
• B) Reject the project as the NPV is $44,150.
• C) Reject the project as the NPV is $(44,150).
• D) Accept the project as the NPV is $18,250.
• E) Reject the project as the NPV is $18,250.

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Definitions:

Marginal Cost

The additional total expense incurred from producing one more unit of a product or service.

Free Entry

A market condition where firms can freely enter or exit the industry without facing significant barriers to entry.

Wheat

A cereal grain that is a staple food in many parts of the world, used to make products like bread, pasta, and pastry.

Monopolistically Competitive

Describes a market structure in which many firms sell products that are similar but not identical, allowing for some degree of market power.