A Report from the Marketing Department Indicates That a New

question 85

Multiple Choice

A report from the marketing department indicates that a new product will generate the following revenue stream: $62,500 in the first year,$89,400 in year two,$136,200 in year three,$128,300 in year four,and $112,000 in year five.If your firm's discount rate is 11% and the cash flows are received at the end of each year,what is the present value of this cash flow stream?

• A) $379,435.35
• B) $421,173.24
• C) $476,036.04
• D) $528,400.00

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Definitions:

Machine-Hours

A unit of measure representing the operation of machinery for one hour, often used in manufacturing and production cost analysis.

Contribution Margin

The sum left from the revenue of sales once variable costs have been subtracted, utilized to pay for fixed expenses and create profit.

Administrative Expenses

Costs related to the general administration of a business, such as salaries of executive personnel, accounting, and human resources.

Net Operating Income

A measure of a company's profitability calculated as total revenue minus operating expenses, excluding interest and taxes.