SAP IncReceived a $1

question 49

Multiple Choice

SAP Inc.received a $1.5 million grant under its Small Business Innovation program.SAP invested the grant money and developed a system to remove metal contaminants from storm water in shipyards.The firm estimates that each shipyard spends $400,000 a year on storm water clean-up efforts.If SAP is able to sign up and retain four shipyards in the first year onwards,what is the present value (PV) of the project (net of investment) if the cost of capital for SAP is 16% per year? Assume a cost of operations and other costs for SAP equal 60% of revenue.

• A)$1.9 million
• B)$2.1 million
• C)$2.3 million
• D)$2.5 million
• E)$3.1 million

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Definitions:

PQ Remains Same

A situation in economic terms where the price level (P) and quantity (Q) of goods and services in the market stay unchanged over a period.

Velocity V

Velocity V typically refers to the velocity of money, a measurement of the rate at which money is exchanged in an economy.

Percentage Fall

A measure that indicates the decrease in a value or quantity, expressed as a percentage of its previous value.

Full Employment

A situation in which all available labor resources are being used in the most economically efficient way.