A Project Manager Is Using the Net Present Value Method

question 75

Multiple Choice

A project manager is using the net present value method to make the final decision on which project to undertake.The company has a 15% required rate of return and expects a 5% rate of inflation for the following four years.What is the NPV of a project that has cash flows as shown in the table? $$\begin{array} { | l | l |} \hline \text { Year } & \text { Cash Flow } \\\hline 0 & - \$ 350,000 \\\hline 1 & \$ 50,000 \\\hline 2 & \$ 80,000 \\\hline 3 & \$ 100,000 \\\hline 4 & \$ 150,000 \\\hline\end{array}$$

• A)$4.955
• B)$42,586
• C)-$23,667
• D)-$122,569

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Definitions:

ANOVA Table

A statistical table used in analysis of variance that summarizes the sources of variability in the data, helping to determine whether differences between groups are significant.

F-ratio

A statistic used to compare the variances among group means in an analysis of variance (ANOVA) test, determining if any significant differences exist.

P-value

A statistical measure that indicates the probability of an observed data occurring under a particular assumption or model usually associated with hypothesis testing.

ANOVA Table

A structured representation of the analysis of variance, showing statistical tests to determine if there are differences among group means.