Kipling Company Has Invested in a Project That Has an Eight-Year

question 87

Multiple Choice

Kipling Company has invested in a project that has an eight-year life.It is expected that the annual cash inflow from the project will be $20,000.Assuming that the project has an internal rate of return of 12%,how much was the initial investment in the project? (Ignore income taxes in this problem.) (Round your PV factor to 5 decimal places and final answer to nearest whole dollar amount.)

• A) $64,648.
• B) $80,800.
• C) $99,353.
• D) $160,000.

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Definitions:

Real Output

Measures the quantity of goods and services produced, adjusted for inflation, to reflect the actual physical output.

Diminishing Returns

Diminishing returns is an economic principle stating that as more investments or resources are added to a production process, the incremental gain in output will eventually decrease if all other factors remain constant.

Disguised Unemployment

Situations where more people are employed in a task or job than is necessary for its completion, leading to inefficiency.

Capital Goods

Long-term assets such as buildings, machinery, and equipment purchased by businesses to produce goods and services.