A New Project Has an Initial Cost of $125,000 and Cash

question 56

Multiple Choice

A new project has an initial cost of $125,000 and cash flows of $33,300,$78,700,and $69,500 for Years 1 to 3,respectively.What is the net present value (NPV) of this project if the discount rate is 19.3 percent? What is the NPV if the discount rate is 12.7 percent?

• A)$1,127.10; $17,209.11
• B)-$859.11; $17,209.11
• C)-$859.11; $15,062.34
• D)$1,127.10; $17,388.09
• E)-$604.17; $15,062.34

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Definitions:

Federal Trade Commission Act

The federal law of 1914 that established the Federal Trade Commission.

Alcoa Case

A 1945 case in which the courts ruled that the possession of monopoly power, no matter how reasonably that power had been used, was a violation of the antitrust laws; temporarily overturned the rule of reason applied in the U.S. Steel case.

Structuralist Approach

A methodology in economics and social sciences that focuses on understanding the underlying structures that shape economic outcomes.

Treble Damages

A legal remedy that allows a court to triple the amount of the actual or compensatory damages awarded to the plaintiff, often used in antitrust and patent infringement cases.