A Project Is Expected to Create Operating Cash flOws of $68,300

question 97

Multiple Choice

A project is expected to create operating cash flows of $68,300 a year for 3 years. The initial cost of the fixed assets is $80,000. These assets will be worthless at the end of the project. An
Additional $6,000 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 14%?

• A) $72,567.47
• B) $73,408.18
• C) $76,617.30
• D) $78,567.47
• E) $79,200.03

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Definitions:

Conditioning

A process of behavior modification by which a subject comes to associate a desired behavior with a previously unrelated stimulus.

Negative Contrast Effects

A psychological phenomenon where an individual's perception of an option is negatively influenced by a comparison with a better option.

Reinforcement

A process in operant conditioning that increases the likelihood of a behavior being repeated, which can be either positive (by adding a stimulus) or negative (by removing a stimulus).

Negative Contrast Effect

The effect in which a shift from high to low reward magnitude produces a lower level of responding than if the reward magnitude had always been low.