What Is the NPV of a Project That Costs $100,000

question 113

Multiple Choice

What is the NPV of a project that costs $100,000 and returns $45,000 annually for three years if the opportunity cost of capital is 14 percent?

• A)$3,397.57
• B)$4,473.44
• C)$16,100.00
• D)$35,000.00

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Definitions:

Variable Overhead Rate

the rate at which variable overhead costs are applied to units of production, often used in calculating the total cost of producing a product.

Fixed Manufacturing

Costs associated with manufacturing that remain constant, regardless of the level of production, such as rent for factory premises.

Variable Overhead

Costs that vary with production volume but cannot be traced directly to each unit produced, such as utilities for the manufacturing plant.

Supplies Variance

The difference between the budgeted cost of supplies and the actual cost incurred.