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

question 20

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 NPV = PV of inflows - required investment
• = $45,000

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Definitions:

Pure

Refers to a substance that is not mixed with any other substance, having a homogenous chemical composition.

Ionization

The process by which an atom or a molecule acquires a negative or positive charge by gaining or losing electrons.

Important Factor

A significant element or aspect that contributes to a result or outcome.

Gas

A state of matter consisting of particles that have neither a defined volume nor defined shape, typically able to expand freely.