Rossiter Restaurants Is Analyzing a Project That Requires $180,000 of Fixed

question 83

Multiple Choice

Rossiter Restaurants is analyzing a project that requires $180,000 of fixed assets.When the project ends,those assets are expected to have an aftertax salvage value of $45,000.How is the $45,000 salvage value handled when computing the net present value of the project?

• A)reduction in the cash outflow at time zero
• B)cash inflow in the final year of the project
• C)cash inflow for the year following the final year of the project
• D)cash inflow prorated over the life of the project
• E)not included in the net present value

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Definitions:

Lump Sum

A single payment of money, as opposed to a series of payments made over time.

Borrower Receives

The amount of capital a borrower obtains from a lender under the terms of a loan.

Return Requirement

The expected rate of return that an investment needs to generate to be considered worthwhile.

Cash Flows

The overall totality of financial exchanges inside and outside a company, deeply affecting its ability to have cash on hand.