The Following Details Are Provided by Ferrous Foundry Company PV of $1

question 80

Multiple Choice

The following details are provided by Ferrous Foundry Company: $$\begin{array} { | c | r | } \hline \text { Initial investment } & \$ 5,000,000 \\\hline \text { Discount rate } & 15 \% \\\hline \text { Yearly cash inflows } & \\\hline 1 & \$ 1,256,000 \\\hline 2 & \$ 1,360,000 \\\hline 3 & \$ 2,402,000 \\\hline 4 & \$ 1,158,000 \\\hline\end{array}$$ PV of $1:
$$\begin{array} { | c | c | c | c | } \hline & 13 \% & 14 \% & 15 \% \\\hline 1 & 0.885 & 0.877 & 0.87 \\\hline 2 & 0.783 & 0.769 & 0.756 \\\hline 3 & 0.693 & 0.675 & 0.658 \\\hline 4 & 0.613 & 0.592 & 0.572 \\\hline\end{array}$$ What is the NPV of the project?

• A) $(636,228)
• B) $590,000
• C) $618,409
• D) $(594,486)

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Definitions:

Empirical Method

Gaining knowledge through the observation of events, the collection of data, and logical reasoning.

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The quality of being impartial or neutral, free from personal bias or emotions, particularly in the analysis or presentation of data.

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The use of systematic methods to observe the natural world, including human behavior, and to draw conclusions.

Psychology

The scientific study of the human mind and its functions, especially those affecting behavior in a given context.