Project a Is a 3-Year Project That Will Cost $50,000

question 17

Multiple Choice

Project A is a 3-year project that will cost $50,000 today. You have estimated the following probability distribution for the future cash flows from the project:
-Refer to the information above. Assume the appropriate cost of capital is 15%. What is the NPV of Project A? Round your answer to the nearest dollar.

• A)$19,257
• B)-$23,623
• C)$19,647
• D)$16,898

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Definitions:

Weighted Average

An average resulting from the multiplication of each component by a factor reflecting its importance.

Z-score

A numerical metric indicating how a particular value compares to the average of a dataset, expressed by the number of standard deviations it lies from the mean.

P-value

The likelihood of encountering experimental results that are at least as significant as the actually observed results, given the null hypothesis is assumed to be accurate.

Pooled Variance

A method used in statistics to combine variances from two or more groups to estimate a common variance when they are assumed to be equal.