A Project Will Cost $20,000 and Is Expected to Return

question 32

Multiple Choice

A project will cost $20,000 and is expected to return $22,000 next year. Your marginal tax rate is 30%. One-year taxable bonds that have similar risk to the project are yielding 9%.
Similar-risk municipal bonds are yielding 6%. What is the NPV of this project? Round your
Answer to the nearest dollar.

• A)-$367
• B)$132
• C)$189
• D)$183

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Definitions:

Net Income

The remaining profit of a company after all necessary subtractions, such as taxes and expenses, from its revenue.

Net Income

A company's remaining earnings after deducting all taxes and costs from the complete revenue.

Income Splitting

A tax strategy used to transfer income from a higher-tax-rate taxpayer to a lower-tax-rate taxpayer to reduce the total tax paid.

Salary Allowances

Additional monetary benefits provided to employees on top of their regular salary, potentially for specific purposes or expenses.