ELK,IncHas Compiled This Information for a Proposed Project: Sales Price

question 74

Multiple Choice

ELK,Inc.has compiled this information for a proposed project: sales price = $89 ±3 percent;fixed costs = $21,800 ±1 percent;variable cost per unit = $42.90 ±3 percent;sales quantity = 1,500 units ±5 percent;tax rate = 34 percent;initial investment in fixed assets = $36,500;depreciation method = straight-line to a zero book value over the project's life;project life = 4 years;salvage value of fixed assets = $0;net working capital requirement = $4,800,which will be recouped at the end of the project;discount rate = 12 percent.What is the project's net present value for the pessimistic scenario?

• A)$40,661.08
• B)$47,422.30
• C)$45,899.21
• D)$44,371.15
• E)$52,222.12

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Definitions:

Financial Statements

Are documents that provide an overview of a company's financial condition, including the balance sheet, income statement, and cash flow statement.

General Ledger

The master set of accounts that summarize all transactions occurring across a company.

Adjusting Entry

An adjusting entry is a journal entry made in the accounting records at the end of an accounting period to allocate income and expenditure to the period in which they actually occurred.

Salaries and Wages Expense

The total amount recorded by a company for the cost of salaries and wages paid to employees.