BASIC INFORMATION: a Three-Year Project Will Cost $60,000 to Construct

question 125

Multiple Choice

BASIC INFORMATION: A three-year project will cost $60,000 to construct. This will be depreciated straight-line to zero over the three-year life. The price per unit sold is $20 and the variable cost per
Unit sold is $10. Fixed costs are $30,000 per year.
In addition to the BASIC INFORMATION, you find that a salvage company will pay you $10,000 for
The assets at the end of year 3. The project will require an investment of $10,000 up front for net
Working capital. If you expect to sell 7,000 units per year, compute the NPV assuming a required
Return of 15% and a tax rate of 30%.

• A) Less than $0
• B) $11,347
• C) $14,416
• D) $18,807
• E) More than $20,000

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Definitions:

Relative Frequency Histogram

A type of histogram that displays the relative frequencies, or proportions, of data points within specified intervals.

Open-ended Classes

A teaching or learning style with no predetermined limits on the topics to be explored or the depth of inquiry.

Equal Width Classes

A method in data binning where each class or bin has the same width, used in the construction of histograms and frequency distributions.

Mutually Exclusive Classes

Categories or groups that cannot occur simultaneously, implying that the occurrence of one event precludes the occurrence of another.