Forise Water Company Drills Small Commercial Water Wells $\begin{array} { l l } \text { Asset } & \$ 600,000 \\ \text { Working capital } & \$ 128,000 \end{array}$

question 37

Multiple Choice

Forise Water Company drills small commercial water wells.The company is in the process of analyzing the purchase of a new drill.Information on the proposal is provided below. Initial investment:
$\begin{array} { l l } \text { Asset } & \$ 600,000 \\ \text { Working capital } & \$ 128,000 \end{array}$
Operations (per year for four years) :
$\begin{array}{lr}\text { Cash receipts } & \$ 450,000 \\\text { Cashexpenditures } & \$ 190,000\end{array}$
Disinvestment:
$\begin{array}{cr}\text { Salvage value of d rill (existing) } & \$ 50,000 \\\text { Discount rate } & 18 \%\end{array}$ What is the net present value of the investment? Assume there is no recovery of working capital.

• A) $(124,280)
• B) $21,400
• C) $82,724
• D) $149,400

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Definitions:

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The tendency to favor members of one's own group over those from external groups, often leading to prejudicial attitudes and discrimination.

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Groups formed without any specific rationale or logical reasoning, often for experimental purposes.

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Asian

Pertaining to or originating from Asia, including its peoples, cultures, languages, and societies.