A Project Requires an Initial Investment in Equipment of $90,000

question 19

Multiple Choice

A project requires an initial investment in equipment of $90,000 and then requires an initial investment in working capital of $10,000 (at t = 0) .You expect the project to produce sales revenue of $120,000 per year for three years.You estimate manufacturing costs at 60% of revenues.(Assume all revenues and costs occur at year-end,i.e.,t = 1,t = 2,and t = 3.) The equipment depreciates using straight-line depreciation over three years.At the end of the project,the firm can sell the equipment for $10,000.The corporate tax rate is 30% and the cost of capital is 16.5%.Calculate the NPV of the project.

• A)$5,648
• B)$3,840
• C)-$2,735
• D)$4,848

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Definitions:

Participant Observation

A methodology associated with ethnography whereby the researcher both observes and becomes a member in a social setting.

Everyday Lives

The daily existence or routine of individuals, encompassing all mundane activities, interactions, and experiences.

Stereotypes

Oversimplified generalizations about groups of people that may not accurately reflect reality, often leading to prejudiced attitudes.

Informed Consent

A safeguard through which the researcher makes sure that respondents are freely participating and understand the nature of the research.