A Builder Is Planning to Construct to a Departmental Store

question 2

Multiple Choice

A builder is planning to construct to a departmental store with an investment worth $1,200.He receives proposals from two retailers interested to lease space in it assuring him future cash flows worth $1,000 at the end of the first year and $700 at the end of two years.If the building lasts only for two years and the discount rate is 15 percent, what would be the net present value of this project?

• A)$300.50
• B)$257.63
• C)$198.67
• D)$118.38

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Definitions:

Cost Of Capital

The rate of return a company must earn on its project investments to maintain its market value and attract funds.

Cost Of Labor

The total amount of wages and benefits paid to employees for their work.

Isocost Line

A graph that shows all possible combinations of capital and labor that can be purchased for a given total cost.

Total Cost

The total amount of all costs associated with the creation of goods or services, encompassing both constant and changing expenses.