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

question 96

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:

Components in Parallel

Parts of a system designed to operate simultaneously, ensuring that if one part fails, the system as a whole can still function.

System Reliability

The probability that a system or component will perform its required functions without failure under stated conditions for a specified period of time.

Components in Series

A configuration where components are connected end-to-end in such a way that the failure of one component results in the failure of the entire system.

System Reliability

The probability that a system, including all individual components and processes, will perform its required functions without failure under stated conditions for a specified period of time.