Determine If This Project Is Profitable Under the Following Circumstances

question 18

Multiple Choice

Determine if this project is profitable under the following circumstances:
A company is undertaking a new project.The specialized equipment that needs to be bought has an expense of $28,000.In addition, permits and licenses are required which will cost $1500.Employee training will be an additional $46,000 expenditure.To produce the merchandise, raw materials are required that will cost $48,000 and this project will generate cash flows of $25,000 per year for 10 years.The cost of capital for this project is 12%.

• A)Yes, the project is acceptable with a net present value equaling about $17,756.
• B)Yes, the project is acceptable with a net present value equaling about $48,257.
• C)No, the project is not acceptable with a net present value equaling about -$15,275.
• D)No, the project is not acceptable with a net present value equaling about -$18,000.

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Definitions:

Confidence Interval

A span of values, acquired through sample analysis, that is presumed to enclose the value of an undetermined population attribute.

Functioning Time

The duration or period during which a system, device, or component operates effectively.

Standard Deviation

A gauging of the extent of deviation or scattering among a group of figures.

Normal Population

A population distribution that follows a normal or Gaussian curve, with a symmetric shape centered around the mean, typical in many natural phenomena.