What Is the NPV for the Following Project If Its

question 83

Multiple Choice

What is the NPV for the following project if its cost of capital is 15 percent and its initial after tax cost is $5,000,000 and it is expected to provide after-tax operating cash inflows 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) $1,700,000
• B) $371,764
• C) ($137,053)
• D) none of the above

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Definitions:

Operating Cash Flow

Operating cash flow is a measure of the cash generated by a company's normal business operations, indicating its ability to cover operating expenses and invest in its business.

Net New Borrowing

The difference between the total amount of debt a company takes on and the amount it repays within a specific period, indicating the net increase in debt.

Net Capital Spending

The total expenditure on fixed assets less any sales of fixed assets, measuring a company's investment in its physical assets.

Net Fixed Assets

The value of a company's property, plant, and equipment minus any depreciation, representing the company's long-term investments.