Rocket Red,Inc

question 95

Multiple Choice

Rocket Red,Inc.is considering a five-year project that has initial after-tax outlay or after-tax cost of $170,000.The future after-tax cash inflows from its project for years 1 through 5 are $45,000 for each year.Rocket Red uses the net present value method and has a discount rate of 11.25%.Will Rocket Red accept the project?

• A)Rocket Red accepts the project because the NPV is about $5,455.
• B)Rocket Red accepts the project because the NPV is about $165,275.
• C)Rocket Red rejects the project because the NPV is about -$4,725.
• D)Rocket Red rejects the project because the NPV is about -$154,725.

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Definitions:

Closing Accounts

The process of finalizing all ledger accounts to prepare financial statements at the end of an accounting period.