A Capacity Alternative Has an Initial Cost of $50,000 and Cash

question 99

Multiple Choice

A capacity alternative has an initial cost of $50,000 and cash flow of $20,000 for each of the next six years. If the cost of capital (i.e., interest rate) is 8 percent, what is the approximate net present value of this investment?

• A) $20,920
• B) $26,160
• C) $42,460
• D) $70,920
• E) $92,460

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Definitions:

Peanut Butter

A spread made from ground, roasted peanuts, often used in sandwiches and as a cooking ingredient.

Equilibrium Price

The price at which the quantity of a product demanded by consumers equals the quantity supplied by producers, leading to market balance.

Buyers

Entities or persons that buy products or services.

Sellers

Individuals or entities that offer goods or services for sale to consumers or other businesses in the market.