Rossiter Restaurants Is Analyzing a Project That Requires $180,000 of Fixed

question 44

Multiple Choice

Rossiter Restaurants is analyzing a project that requires $180,000 of fixed assets. When the project ends, those assets are expected to have an aftertax salvage value of $45,000. How is the $45,000 salvage value handled when computing the net present value of the project? 

• A) Reduction in the cash outflow at Time 0 
• B) Cash inflow in the final year of the project 
• C) Cash inflow for the year following the final year of the project
• D) Cash inflow prorated over the life of the project 
• E) Excluded from the net present value calculation

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Definitions:

Earnings Per Share

A financial metric indicating the portion of a company's profit allocated to each outstanding share of common stock, serving as an indicator of a company's profitability.

Net Income

The final profit figure for a company after subtracting all operational expenses, taxes, and costs from the gross revenue.

Cumulative Preferred Stock

A type of preferred stock where dividends accrue if not paid in a given year and must be paid out before any dividends can be distributed to common stockholders.

Declared Dividends

The portion of a company's earnings that has been set aside to be paid out to shareholders, officially announced by its board of directors.