A Project Costs $25,000 and Will Return $27,500 Next Year

question 53

Multiple Choice

A project costs $25,000 and will return $27,500 next year. Taxable bonds that are similar in risk to the project return 11% while similar-risk, tax-exempt bonds are yielding 8%. You pay taxes
At the marginal rate of 25%. What is the NPV of this project? Round your answer to the
Nearest dollar.

• A)-$225
• B)-$173
• C)-$116
• D)+$463

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Definitions:

Supply And Demand

The fundamental economic model that explains the interaction between the quantity of a good or service that producers wish to sell and the quantity that consumers wish to buy.

Standardized Product

A product that is uniform in quality and characteristics, produced in large volumes, and by many different firms.

Determinant

A mathematical concept referring to a scalar value that can be calculated from the elements of a square matrix, often used to solve systems of linear equations.

Shortage

A situation where the demand for a product or service exceeds the available supply at a particular price.