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

question 50

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 straight line over six years while ignoring the half-year convention? The discount rate is 14%.

• A)-$15,561
• B)-$13,283
• C)$13,283
• D)$15,561 Net Present Value = 23,000

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Definitions:

International Accounting Standards

A set of accounting standards stating how particular types of transactions and other events should be reported in financial statements, established by the International Accounting Standards Board.

IAS 17

An International Accounting Standard that prescribes the accounting policies and disclosures applicable to leases for both lessees and lessors.

Capitalized Lease

A lease treated as an asset purchase for accounting purposes, with the asset being capitalized on the balance sheet.

Financial Statements

These are records that provide an overview of a company's financial condition in both short and long term. They include the balance sheet, income statement, and cash flow statement.