A Firm Is Considering a Project That Requires an Initial

question 7

Multiple Choice

A firm is considering a project that requires an initial cash outflow of $1,000,000 for the purchase of a capital asset, which has an eight-year life and a CCA rate of 20%, with the asset class remaining open and the half-year rule applying in the first year.The expected salvage value of the asset is $75,000 at the end of eight years.The project will generate sales revenue of $450,000 in the first year, which will grow at 5% per year in the subsequent years.Variable costs will be $200,000 for the first year, which will also grow at 5% per year.The firm's marginal tax rate is 40% and required return is 12%.What is the project's NPV?

• A)$123,498
• B)$166,707
• C)$1,402,183
• D)$1,509,326

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Definitions:

Phalloplasty

A surgical procedure to construct or reconstruct a penis, often pursued by individuals undergoing gender-affirming surgery.

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Hysterectomy

A surgical procedure that involves removing a woman’s uterus.

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The sequence of physical and emotional phases that occur when an individual becomes sexually aroused and participates in sexually stimulating activities, including phases of excitement, plateau, orgasm, and resolution.