You Have Been Asked to Evaluate an Infinitely-Lived Project

question 11

Multiple Choice

You have been asked to evaluate an infinitely-lived project. Sales in the first year are projected to be $100. Costs are projected at $50. There is no depreciation, and the tax rate is 30%. The real required return is 10%. The inflation rate is projected to be 8%. Sales and costs will increase at the rate of inflation. The project costs $300. What is the NPV?

• A) $142.03
• B) $36.36
• C) $71.72
• D) $50.00

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Definitions:

Mammoth

An extinct species of large, prehistoric elephants known for their massive size and long tusks, or used to describe something enormous.

Air Currents

Movements of air resulting from atmospheric pressure differences, leading to phenomena like wind.

Breeze

A gentle, light wind that is often considered refreshing and pleasant.

Excavated

The act of digging up or removing earth to uncover and discover something buried.