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:

Power Equalization

The process or effort to balance power dynamics among parties, ensuring no single party has disproportionate influence or control.

Pluralist

Pertaining to a system or philosophy that acknowledges multiple distinct interests, perspectives, or parties coexisting within society.

Individual Differences

Variabilities among individuals in behavior, personality, or cognitive processes.

Balance Of Power

A situation in which different forces, powers, or influences are distributed in a way that ensures no single entity or group has dominance over others.