Calculate the NPV for a Project with an Initial Outflow

question 76

Multiple Choice

Calculate the NPV for a project with an initial outflow of $12,000 followed an inflow of $6,000 year 1, $4,500 in year 2, $2,500 in year 3 and $1,000 in year 4 at a cost of capital of 6%.

• A)$12,556.50
• B)-$556.50
• C)-$12,556.50
• D)​$556.95

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Definitions:

Preferred Stock

A type of stock that grants holders priority for dividend payments and, in some cases, priority in asset liquidation over common stockholders.

Stockholders' Equity

The portion of the balance sheet that represents the capital received from investors in exchange for stock (paid-in capital), donated capital and retained earnings.

Cash Dividend

A payment made by a company out of its earnings to shareholders, usually in the form of cash.

Liquidating Dividend

A type of dividend paid by a company to its shareholders out of its capital base, essentially returning a portion of the capital initially invested back to the shareholders.