An Investor Is Considering a Project That Will Generate $800,000

question 120

Multiple Choice

An investor is considering a project that will generate $800,000 per year for four years.In addition to upfront costs,at the completion of the project at the end of the fifth year there will be shut-down costs of $500,000.If the cost of capital is 5%,based on the NPV,at what upfront costs does this project cease to be worthwhile?

• A)$2.32 million
• B)$2.44 million
• C)$2.58 million
• D)$2.84 million
• E)$2.96 million

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Definitions:

Proposed Change

A recommendation to alter a process, system, product, or organization with the aim of improving efficiency or effectiveness.

Shared Power Strategy

a cooperative approach to decision-making and leadership where control and authority are distributed among multiple stakeholders.

High Commitment

A work approach characterized by dedication and a strong sense of responsibility towards organizational goals.

Internalization

The process of incorporating or integrating beliefs, values, standards, or norms into one's own psychological structure, so they guide one's behavior without external enforcement.