Following Details Are Provided by VPN Company Refer to the Following Table for PV Factors

question 17

Multiple Choice

Following details are provided by VPN Company.
$$\begin{array} { | c | c | } \hline \text { Initial investment } & \$ 5,000,000 \\\hline \text { Discount rate } & 15 \% \\\hline \text { Yearly cash flows } & \\\hline 1 & \$ 1,268,000 \\\hline 2 & \$ 1,358,000 \\\hline 3 & \$ 2,416,000 \\\hline 4 & \$ 1,170,000 \\\hline\end{array}$$
Refer to the following table for PV factors:
$$\begin{array} { | c | c | c | c | } \hline & 13 \% & 14 \% & 15 \% \\\hline 1 & 0.885 & 0.877 & 0.87 \\\hline 2 & 0.783 & 0.769 & 0.756 \\\hline 3 & 0.693 & 0.675 & 0.658 \\\hline 4 & 0.613 & 0.592 & 0.572 \\\hline\end{array}$$
What is the NPV of the project?

• A) $590,000 positive
• B) $596,759 negative
• C) $611,224 negative
• D) $624,318 positive

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Definitions:

Squared Values

Numbers that have been multiplied by themselves.

Cost-To-Benefit Analysis

A systematic approach to estimating the strengths and weaknesses of alternatives in terms of costs and benefits.

Numeric Ratio

A comparative figure showing the relative sizes of two quantities expressed as a quotient.

Written Analysis

The process of critically evaluating or discussing a subject in written form to understand its components or relationships.