A Project Will Produce an Operating Cash Flow of $7,300

question 68

Multiple Choice

A project will produce an operating cash flow of $7,300 a year for three years.The initial investment for fixed assets will be $11,600,which will be depreciated straight-line to zero over the asset's 4-year life.Ignore bonus depreciation.The project will require an initial $500 in net working capital plus an additional $500 every year with all net working capital levels restored to their original levels when the project ends.The fixed assets can be sold for an estimated $2,500 at the end of the project,the combined tax rate is 23 percent,and the required rate of return is 12 percent.What is the net present value of the project?

• A)$7,500.95
• B)$9,896.87
• C)$7,072.72
• D)$6,353.41
• E)$8,398.29

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Definitions:

Quantity Demanded

The sum total of a particular good or service that individuals are inclined and financially able to purchase at a given price.

Decrease

A reduction in size, number, or amount.

Substitutes Available

Other products or services that can be used in place of a particular good or service.

Inelastic

A demand or supply that is not significantly altered by changes in price.