A Project Is Expected to Create Operating Cash Flows of $26,500

question 67

Multiple Choice

A project is expected to create operating cash flows of $26,500 a year for four years.The fixed assets required for the project cost $62,000 and will be worthless at the end of the project.An additional $3,000 of net working capital will be required throughout the life of the project.What is the project's net present value if the required rate of return is 12 percent?

• A)$19,208.11
• B)$14,028.18
• C)$15,306.09
• D)$17,396.31
• E)$21,954.17

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Definitions:

Bank Credit

The amount of credit available to a company or individual from a banking institution.

Short-Term Financing

Refers to the borrowing of funds for a period of less than one year to meet immediate financial needs.

Trust Receipts

Trust receipts are documents issued by banks to borrowers indicating that the bank holds the title to imported goods until the loan is repaid.

Collateral

An asset that a borrower offers to a lender as security for a loan, which can be seized if the loan is not repaid.