Ajax Corporation Is Planning a 10 Year Project That Will

question 18

Multiple Choice

Ajax Corporation is planning a 10 year project that will have an initial cost of $500,000.During the first 2 years, there will be cash outflows of $40,000.Years 3-6 will see cash inflows of $120,000.Years 7-10 will see cash inflows of $200,000.If the company's required rate of return is 9%, determine the NPV of the project.

• A)$143,200
• B)$225,650
• C)$375,800
• D)$500,000

---

Definitions:

Real Income

Income adjusted for inflation, reflecting the actual purchasing power of money received.

Consumer Price Index

The Consumer Price Index (CPI) measures changes in the price level of a market basket of consumer goods and services purchased by households.

Bundle

A group of products or services sold together as a single package, often offered at a discounted price compared to purchasing each item individually.

Base Year

The base year is a specific year against which economic or financial indices are measured, allowing for comparison across different periods by setting a standard reference point.