You Are Evaluating a Project for Your Company

question 63

Multiple Choice

You are evaluating a project for your company. You estimate the sales price to be $10 per unit and sales volume to be 3,000 units in year 1; 10,000 units in year 2; and 1,000 units in year 3. The project has a three-year life. Variable costs amount to $3 per unit and fixed costs are $25,000 per year. The project requires an initial investment of $50,000 in assets that will be depreciated straight-line to zero over the three-year project life. The actual market value of these assets at the end of year 3 is expected to be $10,000. NWC requirements at the beginning of each year will be approximately 25 percent of the projected sales during the coming year. The tax rate is 34 percent and the required return on the project is 15 percent. What change in NWC occurs at the end of year 1?

• A)$11,550
• B)$14,875
• C)$17,500
• D)$23,167

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Definitions:

Group Identity

Refers to the sense of belonging to a particular group, influencing one's self-perception and behavior as part of that group.

Emotional Reactivity

The extent to which an individual responds emotionally to stimuli, encompassing intensity, threshold, and recovery time of emotional responses.

Incidence Of Depression

The rate at which new cases of depression occur in a population over a specific period of time.

Work Hours

The amount of time an individual spends on occupational tasks or duties within a specific period.