Garden-Grow Products Is Considering a New Investment Whose Data Are

question 32

Multiple Choice

Garden-Grow Products is considering a new investment whose data are shown below. The equipment would be depreciated on a straight-line basis over the project's 3-year life, would have a zero salvage value, and would require some additional working capital that would be recovered at the end of the project's life. Revenues and other operating costs are expected to be constant over the project's life. What is the project's NPV? (Hint: Cash flows are constant in Years 1 to 3.)

• A) $23,852
• B) $25,045
• C) $26,297
• D) $27,612
• E) $28,993

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Definitions:

Consideration

In contract law, the benefit or value that each party agrees to exchange as part of a contractual agreement, which is a requirement for a valid contract.

Assignee

A person to whom an assignment is made.

Assignor

The maker of an assignment.

Donee Beneficiary

A third party who benefits from a contract made between two other parties, intended by those parties to receive a benefit from the contract.