Roy Is Analyzing a 5-Year Project with an Initial Cost

question 43

Multiple Choice

Roy is analyzing a 5-year project with an initial cost of $210,000,a required return of 16 percent,and a probability of success of 62 percent.If the project fails,it will generate an annual after-tax cash flow of -$48,500.If the project succeeds,the annual after-tax cash flow will be $79,000.He has further determined that if the project fails,he will shut it down after the first year and lose all of his original investment.If,however,the project is a success,he can expand it with no additional investment and increase the after-tax cash flow to $154,000 a year for Years 2-5.At the end of Year 5,the project would be terminated and have no salvage value.What is the net present value of this project at Time 0?

• A)$46,655.42
• B)$32,560.35
• C)$47,297.19
• D)$62,543.35
• E)$59,297.19

Recognize the importance and method of extending credit in business communication.

Understand the role and structure of adjustment messages in building and maintaining business reputation.

Grasp the function of memorandums, form messages, and other tools for internal communication.

Identify strategies to enhance customer retention through resale and reassurance in adjustment messages.

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