What Is the NPV for the Following Project If Its

question 161

Multiple Choice

What is the NPV for the following project if its cost of capital is 12 percent and its initial after tax cost is $5,000,000 and it is expected to provide after-tax operating cash flows of $1,800,000 in year 1, $1,900,000 in year 2, $1,700,000 in year 3 and ($1,300,000) in year 4?

• A) $(1,494,336)
• B) $1,494,336
• C) $158,011
• D) Two of the above

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Definitions:

Purchases

Transactions involving the acquisition of goods or services in exchange for payment, for the purpose of operating a business.

Mortgage Payable

A liability that represents the amount of money owed on a mortgage loan, which the borrower must repay to the lender over time.

Credit Balance

A situation where the total credits in an account exceed the total debits; often indicates amounts owed by a business.

Debit Balance

A financial statement condition where debits exceed the amount of credits in an account.