A Project Will Produce Cash Inflows of $1,750 a Year

question 72

Multiple Choice

A project will produce cash inflows of $1,750 a year for four years.The project initially costs $10,600 to get started.In year five,the project will be closed and as a result should produce a cash inflow of $8,500.What is the net present value of this project if the required rate of return is 14.75%?

• A)-$5,474.76
• B)-$1,306.18
• C)-$935.56
• D)$1,011.40
• E)$5,474.76

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Definitions:

ACP

Average Collection Period (ACP) is a financial metric that measures the average number of days it takes for a company to collect payments from its customers after a sale has been made.

Bad Debts

Accounts receivable that a company does not expect to collect and writes off as a loss.

Credit Policy

The guidelines a company follows to determine the creditworthiness of its customers and the terms and conditions of credit it will extend to them.

Bad Debts

Amounts owed to a company that are written off as uncollectible, typically from customers who fail to pay their invoices.