Bruno's Lunch Counter Is Expanding and Expects Operating Cash Flows

question 90

Multiple Choice

Bruno's Lunch Counter is expanding and expects operating cash flows of $29,000 a year for 4 years as a result.This expansion requires $39,000 in new fixed assets.These assets will be worthless at the end of the project.In addition,the project requires $3,000 of net working capital throughout the life of the project.What is the net present value of this expansion project at a required rate of return of 15 percent?

• A)$18,477.29
• B)$21,033.33
• C)$28,288.70
• D)$29,416.08
• E)$42,509.63

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Definitions:

Attractiveness

The quality of being appealing or desirable, often considered in contexts such as product design, marketability, or physical appearance.

Valence

In psychology and motivational theory, the attractiveness or desirability of a reward or outcome.

Outcome Satisfies

The result of an action or process meets the expectations or requirements set forth.

Expectancy Theory

A psychological theory that suggests an individual's motivation is influenced by the expected outcome and the value placed on that outcome.