(Present Value Tables Are Required

question 169

Multiple Choice

(Present value tables are required. ) Mantua Motors is evaluating a capital investment opportunity.This project would require an initial investment of $38,000 to purchase equipment.The equipment will have a residual value at the end of its life of $3,000.The useful life of the equipment is 5 years.The new project is expected to generate additional net cash inflows of $12,000 per year for each of the five years.Mantua Motors' required rate of return is 14%.The net present value of this project is closest to

• A)($1,994).
• B)$4,753.
• C)$3,196.
• D)$28,386.

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Definitions:

Consumer Surplus

The difference between the highest price a consumer is willing to pay and the actual market price they pay.

Monopoly

A market structure characterized by a single seller or producer dominating the entire market, with no close substitutes available.

Network Externalities

The effect that the number of users of a product or service has on the value of that product to others, often leading to increased utility as more people use it.

Patents

Legal documents granting exclusive rights to inventors for their creations, preventing others from making, using, or selling the invention for a certain period of time.