Lithium,Inc

question 28

Multiple Choice

Lithium,Inc.is considering two mutually exclusive projects,A and B.Project A costs $95,000 and is expected to generate $65,000 in year one and $75,000 in year two.Project B costs $120,000 and is expected to generate $64,000 in year one,$67,000 in year two,$56,000 in year three,and $45,000 in year four.The firm's required rate of return for these projects is 10%.The net present value for Project A is

• A) $12,358.
• B) $16,947.
• C) $19,458.
• D) $26,074.

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Definitions:

Illusory Promise

A statement that appears to be a binding commitment but allows for so much discretion that it does not legally bind the party making it.

Promisor

The party in a contract who makes a promise to perform or provide a benefit to the promisee.

Statute of Limitations

A law that sets the maximum time after an event within which legal proceedings may be initiated.

Previous Debt

An obligation or a financial liability that was incurred before the current period or transaction being considered.