Stanley Company Invested in an Asset with a Useful Life

question 46

Multiple Choice

Stanley Company invested in an asset with a useful life of 4 years and no salvage value. The company's expected rate of return is 12%. The cash inflows and present value factors for 4 years are as follows: If the asset generates a positive net present value of $3,000, what was the amount of the original investment?

• A) $8,036
• B) $28,050
• C) $31,050
• D) $34,050

---

Definitions:

Operating Expense Fee

Fees charged by mutual funds and investment companies for the cost of managing the fund, including administrative and management services.

Front-End Load Fee

A charge applied at the time of purchase of an investment, typically pertaining to mutual funds.

12b-1 Fee

A fee that mutual funds may charge for marketing, distribution, and service expenses, expressed as a percentage of assets under management.

Net Asset Value

The value per share of a fund, calculated by dividing the total value of the fund's assets minus its liabilities by the number of shares outstanding.