A Project Will Require $543,000 for Fixed Assets, $118,000 for Inventory

question 78

Multiple Choice

A project will require $543,000 for fixed assets, $118,000 for inventory, and $142,000 for accounts receivable. Short-term debt is expected to increase by $65,000. The project has a six-year life. The fixed assets will be depreciated straight-line to a zero book value over the life of the project. No bonus depreciation will be taken. The project is expected to generate annual sales of $905,000 with costs of $730,000. What is the project's cash flow at Time 0?

• A) −$536,000
• B) −$738,000
• C) −$720,000
• D) −$779,000
• E) −$944,000

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Definitions:

Data Analysis

The process of inspecting, cleansing, transforming, and modeling data with the goal of discovering useful information, informing conclusions, and supporting decision-making.

Probability

A measure of the likelihood or chance that a particular event will occur, expressed as a number between 0 and 1.

Null Hypothesis

A default hypothesis that there is no significant difference or effect, used as a starting point for statistical testing.

Region of Rejection

The range of values in a statistical test for which the null hypothesis is rejected.