Phone Home,Inc

question 38

Multiple Choice

Phone Home,Inc.is considering a new 5-year expansion project that requires an initial fixed asset investment of $2.484 million.The fixed asset will be depreciated straight-line to zero over its 5-year tax life,after which time it will be worthless.The project is estimated to generate $2,208,000 in annual sales,with costs of $883,200.The tax rate is 32 percent and the required return on the project is 11 percent.What is the net present value for this project?

• A)$1,432,155
• B)$1,433,059
• C)$1,434,098
• D)$1,434,217
• E)$1,435,008

---

Definitions:

Dividend Income Distributions

Payments made to shareholders from a fund's income derived from dividends on stocks that it owns, typically made on a regular basis.

Capital Gains

The profit from the sale of an asset or investment above its purchase price.

Commingled Funds

Investment funds pooling assets from various accounts, allowing for diversified management and investment in a range of securities.

Equity

Ownership share in a firm.