Assume General Motors Has a Weighted Average Cost of Capital

question 43

Multiple Choice

Assume General Motors has a weighted average cost of capital of 9%. GM is considering investing in a new plant that will save the company $20 million over each of the first two years, and then $10 million each year thereafter. If the investment is $100 million, what is the net present value (NPV) of the project?

• A) $25.8 million
• B) $31.6 million
• C) $28.7 million
• D) $27.3 million

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Definitions:

Temporary Endeavor

A unique project or program established to achieve a specific goal or set of objectives within a defined timeframe.

Graphic Scheduling Technique

A method used in project management to visually represent tasks, their durations, and sequencing on a timeline, facilitating the planning and tracking of project progress.

Gantt Chart

A visual scheduling tool that outlines project timelines, tasks, and milestones in a horizontal bar chart format.

PERT Network

A project management tool used to schedule, organize, and coordinate tasks within a project, emphasizing the analysis of task sequences and durations.