A Project Will Cost $50,000 Initially, and Is Expected to Return

question 55

Multiple Choice

A project will cost $50,000 initially, and is expected to return $25,000 in years 1 and 2, -$20,000 in year 3, and $25,000 in years 4 and 5. Calculate the project's NPV if the appropriate cost of
Capital is 20%. Round your answer to the nearest dollar.

• A)+$28,010
• B)-$1,276
• C)-$2,247
• D)+$21,872

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Definitions:

Risk-Free Return

The theoretical return on an investment with zero risk of financial loss, typically associated with government bonds.

Time-Weighted Return

A method to measure the rate of return of an investment portfolio which eliminates the distorting effects of inflows and outflows of money.

Dividend

Dividend represents the distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.

Share

A unit of ownership in a company or financial asset, often traded on a stock exchange.