What Is the NPV of a Project That Costs $100,000

question 103

Multiple Choice

What is the NPV of a project that costs $100,000, provides $23,000 in cash flows annually for 6 years, requires a $5,000 increase in net working capital, and depreciates the asset straight-line over 6 years while ignoring the half-year convention? The discount rate is 14%.

• A) -$15,560.04
• B) -$13,282.71
• C) $3,411.14
• D)$14,782.09

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Definitions:

Loan

A financial arrangement where one party lends an asset, usually money, to another party under the condition of eventual repayment of the principal amount along with interest or charges.

Foreign Exchange Fluctuations

Variations in the value of one currency relative to another, impacting international trade and investments.

Spot Rate

The current market price for immediately exchanging one currency for another.

Forward Contract

A binding financial agreement to buy or sell an asset at a predetermined future date and price.