An Outlay of $180,000 Is Expected to Yield the Following

question 7

Multiple Choice

An outlay of $180,000 is expected to yield the following cash flows: The cost of capital is 12 percent. What is the NPV?

• A)$8,505
• B)$5,070
• C)$3,525
• D)$2,982

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Definitions:

Capital Intensive

A business process or industry that requires large amounts of money and financial resources to produce a good or service.

Break-even Point

The juncture where the sum of all expenses matches the sum of all income, leading to neither a profit nor a deficit.

Variable Expense

Expenses that vary directly with the amount of production or the degree of operational activity.

Contribution Margin Ratio

The percentage of each sale that exceeds the variable costs of production.