Lincoln Industries Inc

question 6

Multiple Choice

Lincoln Industries Inc. is considering a project that has an initial after-tax outlay or after-tax cost of $350,000. The respective future cash inflows from its five-year project for years 1 through 5 are $75,000 each year. Lincoln expects an additional cash flow of $50,000 in the fifth year. The firm uses the net present value method and has a discount rate of 10%. Will Lincoln accept the project?

• A) Lincoln accepts the project because it has an NPV greater than $5,000.
• B) Lincoln rejects the project because it has an NPV less than $0.
• C) Lincoln accepts the project because it has an NPV greater than $18,000.
• D) There is not enough information to make a decision.

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