A Project Will Cost $50,000 to Initiate and Will Generate

question 44

Multiple Choice

A project will cost $50,000 to initiate and will generate real cash flows of $40,000 in each of the next two years.The nominal discount rate has been estimated to be 10% per year.Expected inflation is 4% over the next two years.What is the NPV of the project?

• A)$19,421
• B)$21,574
• C)$23,574
• D)$25,497

Calculate income tax expense related to capital budgeting projects.

Estimate the net present value (NPV) of investment projects.

Calculate total cash flows net of income taxes for given years.

Determine the impact of working capital on project cash flows.

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Definitions:

Soft

Pertaining to skills or attributes not based on technical knowledge, such as communication, empathy, and teamwork.

Short-term

Referring to a limited period of time, typically less than one year, focusing on immediate objectives or goals.

Long-term

Pertaining to a time frame that extends over a significant period, usually referring to plans, investments, or strategies that unfold or mature over several years.

Corporate Strategy

Organizational-level decisions that focus on long-term survival.