Empire Industries Is Considering Adding a New Product to Its

question 36

Multiple Choice

Empire Industries is considering adding a new product to its lineup.This product is expected to generate sales for four years after which time the product will be discontinued.What is the project's net present value at a required rate of return of 14.8 percent? $$\begin{array} { | c | r | } \hline \text { Year } & \text { Cash Flow } \\\hline 0 & - \$ 62,000 \\\hline 1 & 16,500 \\\hline 2 & 23,800 \\\hline 3 & 27,100 \\\hline 4 & 23,300 \\\hline\end{array}$$

• A)$1,505.52
• B)$1,067.24
• C)$1,758.71
• D)$1,519.58
• E)$902.71

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Definitions:

Earned Surplus Test

A financial measure used to determine the amount of income that a company has earned and is available for dividends distribution after accounting for all necessary expenses.

Surplus Test

A financial measure used to determine if an entity has excess assets over liabilities, often in insurance contexts.

Net Asset Test

A financial metric used to evaluate a company's financial health by subtracting total liabilities from total assets.

Liability

The state of being responsible for something, especially in terms of legal or financial obligations.