Party Place Is Considering a New Investment Whose Data Are

question 35

Multiple Choice

Party Place is considering a new investment whose data are shown below.The equipment that would be used would have a constant annual capital cost allowance over the project's 3-year life and a zero salvage value.This project would require some additional working capital that would be recovered at the end of the project's life.Revenues and cash operating costs are expected to be constant over the project's 3-year life.What is the project's NPV? (Hint: Cash flows are constant in Years 1 to 3.CCA is modified to smooth out the calculations.) $\begin{array}{ll}\text { WACC } & 10.0 \% \\\text { Net investment in fixed assets (basis) } & \$ 65,000 \\\text { Required new working capital } & \$ 10,000 \\\text { Annual capital cost allowance } & \$ 21,665 \\\text { Sales revenues, each year } & \$ 70,000 \\\text { Cash operating costs, each year } & \$ 25,000 \\\text { Tax rate } & 35.0 \%\end{array}$

• A)$24,112
• B)$25,318
• C)$26,584
• D)$27,913

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Definitions:

Freud

Sigmund Freud, an Austrian neurologist, established psychoanalysis, which is a therapeutic approach to address psychopathology by facilitating conversations between a patient and a psychoanalyst.

Unconditioned Stimulus

In the context of classical conditioning, a stimulus that naturally and effortlessly induces a response, without the need for prior learning.

Classical Conditioning

A foundational concept in behavioral psychology where an automatic conditioned response is established by pairing a neutral stimulus with an unconditioned stimulus.

Fixed-Interval Schedule

A system where the initial reaction is incentivized after a predetermined period has passed.