A Company Finds That the Residual Value of $10,000 for the Equipment

question 138

Multiple Choice

A company finds that the residual value of $10,000 for the equipment in a capital budgeting project has been inadvertently omitted from the calculation of the net present value (NPV) for that project. How does this omission affect the NPV of that project?

• A) The project's NPV should be $10,000 higher with the residual value included.
• B) The project's NPV should be higher, but be less than $10,000 higher, with the residual value included.
• C) The project's NPV should be $10,000 lower with the residual value included.
• D) The project's NPV should be lower, but be less than $10,000 lower, with the residual value included.

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Definitions:

Cash

Money in the form of physical currency or balances held in bank accounts, considered the most liquid form of assets.

Poker Company

A business entity that provides platforms or environments for playing poker, either in physical locations or online.

Cash Collected

Refers to the actual inflow of cash received by a company from its various activities, such as sales, services, or loans.

Rental Income

Income generated from renting out property or other assets to tenants.