A New Project You Are Considering Is Expected to Generate

question 23

Multiple Choice

A new project you are considering is expected to generate an operating cash flow of $48,210 and will initially free up $21,630 in net working capital. Purchases of fixed assets costing $67,800 will be required to start up the project. What is the total cash flow for this project at time zero?

• A) -$67,800
• B) -$46,170
• C) -$1,040
• D) -$26,580
• E) -$41,220

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Definitions:

Compounded Quarterly

Refers to the application of the compound interest rate to an investment or loan on a quarterly basis.

Loan Balance

The remaining amount of money that a borrower must pay on a loan at any given time.

Compounded Semi-annually

Interest calculation method where interest is added to the principal twice a year, increasing subsequent interest calculations.

Loan Payment

The amount of money required to be paid back periodically (usually monthly) on a loan, including both principal and interest.