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:

Antitrust Regulation

Laws and policies designed to promote fair competition for the benefit of consumers, by regulating anti-competitive practices and preventing monopolies in industries.

European Commission

An institution of the European Union responsible for proposing legislation, implementing decisions, and managing the day-to-day business of the EU.

Exxon And Mobil

Refers to the merger between Exxon and Mobil, two major oil companies that combined in 1999 to form ExxonMobil, the largest privately owned oil company in the world.

Horizontal Merger

A business consolidation that occurs between companies operating in the same industry, often aiming to increase market share, reduce competition, or achieve economies of scale.