Artie's Soccer Ball Company Is Considering a Project with the Following

question 65

Multiple Choice

Artie's Soccer Ball Company is considering a project with the following cash flows: Initial outlay = $750,000
Incremental after-tax cash flows from operations Years 1-4 = $250,000 per year
Compute the NPV of this project if the company's discount rate is 12%.

• A) $9,337
• B) $7,758
• C) $4,337
• D) $2,534

---

Definitions:

Variable Costs

Variable costs are expenses that change in proportion to the activity or volume of business, such as materials and labor costs.

Fixed Inputs

Resources used in production that cannot be easily increased or decreased in a short period.

Marginal Cost

The cost of producing an additional unit of a good or service.

Average Total Cost

Represents the per-unit total cost of production, calculated by dividing the total cost by the total quantity produced.