A Project Will Produce an Operating Cash Flow of $14,600

question 81

Multiple Choice

A project will produce an operating cash flow of $14,600 a year for 7 years.The initial fixed asset investment in the project will be $48,900.The net aftertax salvage value is estimated at $12,000 and will be received during the last year of the project's life.What is the net present value of the project if the required rate of return is 12 percent?

• A)$22,627.54
• B)$23,159.04
• C)$34,627.54
• D)$39,070.26
• E)$41,040.83

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Definitions:

Retained Earnings

Cumulative net earnings not distributed as dividends to shareholders, reinvested in the business or available for debt repayment.

Par Value

The nominal or face value of a bond, share of stock, or coupon as indicated on a certificate or instrument.

Dividend Rate

The amount of dividend paid per share divided by the price per share, often expressed as a percentage, indicating the returns shareholders receive for each dollar invested in the company's stock.