A Project Is Expected to Create Operating Cash flOws of $35,000

question 111

Multiple Choice

A project is expected to create operating cash flows of $35,000 a year for four years. The initial cost of the fixed assets is $100,000. These assets will be worthless at the end of the project. An
Additional $5,000 of net working capital will be required throughout the life of the project. What is
The project's net present value if the required rate of return is 11%?

• A) $1,879.25
• B) $3,585.60
• C) $6,879.25
• D) $8,585.60
• E) $11,879.25

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Definitions:

Normal Balance Side

Normal Balance Side is the side (debit or credit) of an accounting ledger on which increases to the account are recorded, depending on the account type.

Double-Entry Accounting

An accounting method requiring every financial transaction to be recorded in two accounts, one debit and one credit, to keep the accounting equation balanced.

Debits

Accounting entries that increase assets or expenses or decrease liabilities, equity, or revenue, recorded on the left side of an account.

Credits

Entries on the right-hand side of an accounting ledger, indicating increases in liability, equity accounts, and revenue, or a decrease in assets.