EKG, IncIs Considering a New Project That Will Require an Initial

question 31

Multiple Choice

EKG, Inc.is considering a new project that will require an initial cash investment of $419,000.The project will produce no cash flows for the first two years.The projected cash flows for Years 3 through 7 are $69,000, $98,000, $109,000, $145,000, and $165,000, respectively.How long will it take the firm to recover its initial investment in this project?

• A)3.81 years
• B)3.98 years
• C)5.57 years
• D)5.99 years
• E)The project never pays back.

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Definitions:

Domestic Price

The price of a good or service within a country's borders.

Domestic Consumption

The total amount of goods and services consumed within a country's borders.

Consumer Surplus

The difference between the total amount that consumers are willing to pay for a good or service and the total amount they actually pay.

Producer Surplus

The disparity between the minimum amount producers are prepared to take for a product or service and the higher amount they end up getting.