A Project Will Cost $50,000 to Initiate and Will Generate

question 69

Multiple Choice

A project will cost $50,000 to initiate and will generate real cash flows of $40,000 in each of the next two years.The nominal discount rate has been estimated to be 10 percent per year.Expected inflation is 4 percent over the next two years.What is the NPV of the project?

• A) $19,421.49
• B) $21,573.55
• C) $23,573.55
• D) $25,496.63

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Definitions:

Adjustments

Entries made in journal accounts at the end of an accounting period to allocate income and expenses to the period in which they actually occurred.