The Neils Corp

question 139

Multiple Choice

The Neils Corp. is considering making an investment in a project of $10,000,000. It expects to receive six payments of $2,500,000 each. Its discount rate is 6%. A table shows that the present value of an annuity of six payments of $1 each, at 6%, has a value of 4.91732. The net present value of this investment opportunity is approximately

• A) Zero
• B) 2293300
• C) 5000000
• D) 12293500

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Definitions:

Accounting Purposes

The reasons or objectives for recording and reporting financial information, such as compliance with legal requirements and informed decision-making.

Separate Entity

A fundamental accounting principle that treats a business as distinct from its owners, creditors, or other businesses.

Corporations

Legal entities recognized by law, formed by individuals or groups to conduct business, which can own assets, incur liabilities, and sell equity.

Initial Stockholders

The original investors or owners of a company’s stock at the time of its issuance.