Corner Jewelers, Inc

question 40

Multiple Choice

Corner Jewelers, Inc. recently analyzed the project whose cash flows are shown below. However, before the company decided to accept or reject the project, the Federal Reserve changed interest rates and therefore the firm's cost of capital (r) . The Fed's action did not affect the forecasted cash flows. By how much did the change in the r affect the project's forecasted NPV? Note that a project's expected NPV can be negative, in which case it should be rejected.

• A) −$59.03
• B) −$56.08
• C) −$53.27
• D) −$50.61
• E) −$48.08

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Definitions:

Operating Income

The profit realized from a business's operations after subtracting operating expenses from gross income.

Net Income

The total profit of a company after all expenses and taxes have been deducted from revenue.