A Project Will Generate $1 Million Net Cash Flow Annually

question 83

Multiple Choice

A project will generate $1 million net cash flow annually in perpetuity.If the project costs $7 million,what is the lowest WACC shown below that will make the NPV negative?

• A) 10%
• B) 12%
• C) 14%
• D) 16%

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Definitions:

Marginal Cost

The expenses involved in creating an additional unit of a product or service.

Maximize Profits

The process of increasing the difference between total revenues and total costs to achieve the highest possible earnings.

Output Level

The quantity of goods or services produced by a firm or industry within a specific time frame.

Marginal Revenue

The additional income received from selling one more unit of a good or service, crucial for decision-making in output levels.