The Following Data Pertain to an Investment Proposal The Working Capital Would Be Released for Use Elsewhere When

question 27

Multiple Choice

The following data pertain to an investment proposal: $\begin{array} { l r } \text { Investment in the Project (equipment) } & \$ 14,000 \\\text { Net Annual Cash Inflows Promised } & \$ 2,800 \\\text { Working Capital Required } & \$ 5,000 \\\text { Salvage Value of the Equipment } & \$ 1,000 \\\text { Life of the Project } & 10 \text { years }\end{array}$ The working capital would be released for use elsewhere when the project is completed.What is the net present value of the project,using a discount rate of 8%? (Ignore income taxes in this problem.)

• A) ($251).
• B) $251.
• C) $2,566.
• D) $5,251.

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Definitions:

Marginal Cost (MC)

The increase in total cost that results from producing 1 more unit of output. Marginal costs reflect changes in variable costs.

Marginal Cost

The financial increment incurred by the production of an extra unit of a product or service.

Average Total Cost

It refers to the total cost per unit of output, calculated by dividing the total cost of production by the number of units produced.

Efficient Mix

An allocation of resources that maximizes the total utility to society, where no individual can be made better off without making someone else worse off.