Garden-Grow Products Is Considering a New Investment Whose Data Are

question 20

Multiple Choice

Garden-Grow Products is considering a new investment whose data are shown below. The equipment would be depreciated on a straight-line basis over the project's 3-year life, would have a zero salvage value, and would require some additional working capital that would be recovered at the end of the project's life. Revenues and other operating costs are expected to be constant over the project's life. What is the project's NPV? (Hint: Cash flows are constant in Years 1 to 3.) $\begin{array}{lr}\text { Project cost of capital ( } r \text { ) } & 10.0 \% \\\text { Net investment in fixed assets (basis) } & \$ 75,000 \\\text { Required new working capital } & \$ 15,000 \\\text { Straight-line deprec. rate } & 33.333 \% \\\text { Sales revenues, each year } & \$ 75,000 \\\text { Operating costs (excl. deprec.) , each year } & \$ 25,000 \\\text { Tax rate } & \$ 35.0 \%\end{array}$

• A) $23,852
• B) $25,045
• C) $26,297
• D) $27,612
• E) $28,993

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Definitions:

Major Product

In a chemical reaction, the major product is the compound that is formed in the greatest quantity relative to other products.

Stepwise Mechanism

A reaction mechanism that occurs through multiple discrete stages, each involving its own transition state and intermediates.

HBr

Hydrobromic acid, a diatomic molecule formed by hydrogen and bromine, used in synthesis and as a strong acid in aqueous solutions.

Major Organic Product

The primary product resulting from a chemical reaction, often emphasized in organic chemistry due to its greater yield or significance.