An Investor Is Considering a Project That Will Generate $800,000

question 120

Multiple Choice

An investor is considering a project that will generate $800,000 per year for four years.In addition to upfront costs,at the completion of the project at the end of the fifth year there will be shut-down costs of $500,000.If the cost of capital is 5%,based on the NPV,at what upfront costs does this project cease to be worthwhile?

• A)$2.32 million
• B)$2.44 million
• C)$2.58 million
• D)$2.84 million
• E)$2.96 million

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Definitions:

Liability

A liability is a financial obligation or debt that a company or individual owes to another entity, which is expected to be paid in the future.

Forged Check

A check that has been illegally modified or fabricated entirely to benefit the person presenting it, often involving unauthorized signature.

E-money

Digital form of currency that can be used to make transactions electronically.

Virtual Cash

Digital or electronic money used for online transactions, not physically tangible.