Roske Company Is Considering a Project with an Initial Investment

question 11

Multiple Choice

Roske Company is considering a project with an initial investment of $40,000 and annual cash inflows of $8,000 per year for seven years.The company's cost of capital is 12 percent.Factors for a 12 percent interest rate for seven years are shown below:
Future Value of $1 2.211
Present Value of $1 0.452
Future Value of an Annuity 10.089
Present Value of an Annuity 4.564
Using the net present value (NPV) to evaluate this proposal,the company should:

• A)invest in the proposal since the NPV is 36,512
• B)reject the proposal since the NPV is ($3,488).
• C)reject the proposal since the NPV is ($36,512).
• D)invest in the proposal since the NPV is $3,488.
• E)None of the answer choices is correct.

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