A Project Requires an Initial Investment of $150 The Cost of Capital Equals 10 Percent

question 15

Multiple Choice

A project requires an initial investment of $150.Your research generates the following estimates of revenues and costs (there are no taxes) : $\begin{array} { | l | c | c | c | } \hline & \text { Pessimistic } & \text { Mast Likely } & \text { Optimistic } \\\hline \text { Revenues } & \mathbf { 3 0 } & \mathbf { 5 0 } & \mathbf { 6 5 } \\\hline \text { Costs } & 20 & 20 & 15 \\\hline\end{array}$ The cost of capital equals 10 percent.Assume that the cash flows occur in perpetuity.Conduct a sensitivity analysis of the project's NPV to variations in costs.(Answers appear in order: [Pessimistic, Most Likely, Optimistic].)

• A)+50, -100, +400
• B)-50, +300, +500
• C)-100, +150, +350
• D)+100, +150, +200

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