Assume a 5-Year Project Has a Base-Case NPV of $213,000

question 61

Multiple Choice

Assume a 5-year project has a base-case NPV of $213,000, a tax rate of 34%, and a cost of capital of 14%. What will be the worst-case NPV if the annual cash flows are reduced in that scenario by $35,000 for each of the 5 years?

• A) -$92,842.17
• B) -$120,157.83
• C) $92,842.17
• D)$120,157.83

---

Definitions:

Book Value

The net value of a company's assets found on its balance sheet, calculated as total assets minus liabilities and intangible assets.

Equipment Replacement

The process of substituting old, outdated, or failed machinery with newer, more efficient models or versions to maintain or enhance production efficiency.

Opportunity Costs

The benefit lost when one alternative is chosen over another, representing the cost of forgoing the next best alternative.

Accounts

This term involves the records that summarize transactions affecting the financial position and operating results of a business.