Project B Is a 2-Year Project That Will Cost $550,000

question 26

Multiple Choice

Project B is a 2-year project that will cost $550,000. You have estimated the following probability distribution for the project's future annual cash flows:
-Refer to the information above. Assume the relevant cost of capital is 10%. What is Project B's NPV? Round your answer to the nearest dollar.

• A)-$11,983
• B)-$268,182
• C)+$25,620
• D)+$538,017

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Definitions:

Cross-Hedging

A strategy used to manage risk by hedging a position in one asset with a position in another asset that has a similar price movement but is not identical.

Bauxite

The primary ore of aluminum, consisting primarily of aluminum oxide minerals, clay minerals, and insoluble materials.

Aluminum Ore

The natural mineral compound from which aluminum is extracted, primarily bauxite.

Aluminum Futures

Contracts to buy/sell aluminum at a future date at a price agreed upon today, used for hedging or speculation on the aluminum market.