A Project Will Produce Operating Cash Flows of $45,000 a Year

question 59

Multiple Choice

A project will produce operating cash flows of $45,000 a year for four years. During the life of the project,inventory will be lowered by $30,000 and accounts receivable will increase by $15,000. Accounts payable will decrease by $10,000. The project requires the purchase of equipment at an initial cost of $120,000. The equipment will be depreciated straight-line to a zero book value over the life of the project. The equipment will be salvaged at the end of the project creating a $25,000 after-tax cash flow. At the end of the project,net working capital will return to its normal level. What is the net present value of this project given a required return of 14%?

• A) $3,483.48
• B) $16,117.05
• C) $27,958.66
• D) $32,037.86
• E) $49,876.02

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Definitions:

Warehouse to Retailers

The process of moving products from storage facilities to retail stores for sale to consumers.

Timely Fashion

Refers to completing tasks or responding within a reasonable or expected timeframe.

Competitive Retailing

The practice of offering goods in a retail market in a way that is competitive in terms of price, quality, and service.

Customer Service

The support companies offer to their customers before, during, and after purchasing or using their products or services.