A Project Requires an Initial Investment in Equipment of $90,000

question 1

Multiple Choice

A project requires an initial investment in equipment of $90,000 and then requires an initial investment in working capital of $10,000 (at t = 0) .You expect the project to produce sales revenue of $120,000 per year for three years.You estimate manufacturing costs at 60 percent of revenues.(Assume all revenues and costs occur at year-end [i.e., t = 1, t = 2, and t = 3]) .The equipment depreciates using straight-line depreciation over three years.At the end of the project, the firm can sell the equipment for $10,000 and also recover the investment in net working capital.The corporate tax rate is 30 percent and the cost of capital is 12 percent. Calculate the NPV of the project.

• A)$14,418
• B)$8,443
• C)$-2,735
• D)$12,873

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Definitions:

Sensory Input

Information gathered by the sensory organs that is then sent to the brain for processing.

Synapses

The junctions through which neurons signal to each other or to non-neuronal cells, allowing the transmission of electrical or chemical signals.

Gap Junctions

Specialized intercellular connections that allow for direct chemical and electrical communication between adjacent cells, facilitating the synchronization of cell activities.

Electrical Synapses

Specialized junctions through which cells of the nervous system signal to each other via direct flow of electric current.