A Proposed Project Requires an Initial Cash Outlay of $849,000

question 13

Multiple Choice

A proposed project requires an initial cash outlay of $849,000 for equipment and an additional cash outlay of $48,500 in year 1 to cover operating costs.During years 2 through 4,the project will generate cash inflows of $354,000 a year.What is the net present value of this project at a discount rate of 13 percent? Round your answer to the nearest whole dollar.

• A)-$152,232
• B)-$66,391
• C)$67,333
• D)$128,612
• E)$239,602

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Definitions:

Maintenance Cost

The expenses incurred for keeping assets in their original operating condition without enhancing their capacity or efficiency.

Cost Formula

This is an equation used to predict the total costs associated with producing a certain number of units or providing a certain level of service.

Variable Costs

Expenses that vary directly with changes in production volume, including costs like raw materials and some labor expenses.

Fixed Costs

Costs that do not vary with the level of production or sales volume.