Energy Project Beta Has the Following Cash Flows:CF 0 -$4,000CF

question 69

Multiple Choice

Energy Project Beta has the following cash flows:CF 0 -$4,000CF 1 $0CF 2 $0CF 3 $1,000CF 4 $3,000CF 5 $7,000If this project has a required rate of return of 10%,will management accept or reject the project?NPV @ r =10% = $3,147 (rounded up)

• A)Management would reject the project because there are no cash flows greater than zero in years 1 and 2.
• B)Management would reject the project because the project has a NPV of $8,000.
• C)Management would reject the project because the project has a NPV of $3,147.
• D)Management would reject the project because the project has a NPV of $5,067.

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Definitions:

Sales Revenue

The overall sum of money made from selling products or services before deducting any costs.

Direct Method

A cash flow statement preparation approach that enumerates major classes of gross cash receipts and payments.

Beginning Balance

The amount of money or value available in an account at the start of a new financial period.

Ending Balance

The amount of money or value in an account at the end of a financial period.