Given the Following Information, Calculate the NPV of a Proposed

question 75

Multiple Choice

Given the following information, calculate the NPV of a proposed project: Cost = R4,000; estimated life = 3 years; initial decrease in accounts receivable = R1000, which must be restored at the end of the project's life; estimated salvage value = R1,000; net income before taxes and depreciation = R2,000 per year; method of depreciation = MACRS; tax rate = 40 percent; required rate of return = 18 percent.

• A) R1,137
• B) -R151
• C) R137
• D) R804
• E) R544

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Definitions:

Social Security Tax

Taxes collected to fund the Social Security program, which provides benefits to retirees, disabled individuals, and survivors of deceased workers.

Regressive

Describes a process or policy that disproportionately affects those with lower incomes or status, often applied to taxation.

Cap Income Level

A ceiling or maximum limit set on income, beyond which additional income may be taxed at a higher rate or may not be eligible for certain benefits.

Income Levels

The categories of income range that differentiate between groups of people within a society, often used to indicate economic disparity.