A Planned Factory Expansion Project Has an Estimated Initial Cost

question 138

Multiple Choice

A planned factory expansion project has an estimated initial cost of $800,000.Using a discount rate of 20%,the present value of future cost savings from the expansion is $843,000.To yield exactly a 20% internal rate of return,the actual investment cost cannot exceed the $800,000 estimate by more than which of the following? (Ignore income taxes in this problem.)

• A) $1,075.
• B) $20,000.
• C) $43,000.
• D) $160,000.