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

question 122

Multiple Choice

What is the NPV of a project that costs $100,000, provides $23,000 in cash flows annually for six years, requires a $5,000 increase in net working capital, and depreciates the asset at 15 percent declining balance over six years and sold at zero salvage value? The discount rate is 14 percent.The tax rate is 40 percent.

• A)-$23,460
• B)-$13,283
• C)$13,283
• D)$44,866

Calculate and interpret the return on total assets.

Determine the gross margin percentage.

Calculate and interpret return on equity (ROE).

Determine the dividend yield ratio.

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Definitions:

Discrete Probability Distributions

Probability distributions that delineate the probabilities of outcomes for discrete random variables.

Hypergeometric Random Variable

A discrete random variable that represents the count of successful outcomes in a series of selections from a limited population where each selection is not returned to the pool.

Probability of Success

The likelihood that an event will occur as desired, often represented as a number between 0 and 1.

Mean

The average of a set of numbers, calculated by dividing the sum of these numbers by the count of the numbers in the set.