Suppose a Six-Year Project Requires an Initial Capital Investment of $425,000

question 21

Multiple Choice

Suppose a six-year project requires an initial capital investment of $425,000 and an initial net working capital investment of $50,000.The project is expected to provide operating revenue of $270,000 per year.The associated operating costs are expected to be $130,000 per year.The capital asset belongs to Class 9 and has a CCA rate of 30%.The asset is expected to sell for $40,000 when the project terminates.Assume the asset class remains open when the asset is sold and the half-year rule applies in the first year.The firm's marginal tax rate is 40% and cost of capital is 8%.What impact would it have on the project's NPV if the cost of capital were 10%?

• A)NPV decreases by 23.14%
• B)NPV decreases by 38.04%
• C)NPV decreases by 48.20%
• D)NPV decreases by 61.41%

---

Definitions:

ADHD

Attention-Deficit/Hyperactivity Disorder, a chronic condition including attention difficulty, hyperactivity, and impulsiveness.

Disruptive Mood Dysregulation Disorder

A childhood condition marked by severe irritability, anger, and frequent, intense temper outbursts.

Clinicians

Healthcare professionals engaged in the direct care and treatment of patients, often within fields such as medicine, psychology, and nursing.

Assortative Mating

A mating pattern where individuals tend to select partners similar to themselves in physical traits, social status, or beliefs.