You Have Been Asked to Evaluate an Infinitely-Lived Project

question 11

Multiple Choice

You have been asked to evaluate an infinitely-lived project. Sales in the first year are projected to be $100. Costs are projected at $50. There is no depreciation, and the tax rate is 30%. The real required return is 10%. The inflation rate is projected to be 8%. Sales and costs will increase at the rate of inflation. The project costs $300. What is the NPV?

• A) $142.03
• B) $36.36
• C) $71.72
• D) $50.00

---

Definitions:

Learned Preferences

Tastes or choices that are acquired through experience, as opposed to innate preferences.

Display Rules

Culturally specific guidelines that dictate how and when emotions should be expressed in social situations.

Cultural Heritage

The legacy of physical artifacts and intangible attributes of a group or society passed down from past generations, including traditions, languages, practices, and objects.

Schachter Theory

A psychological theory suggesting that emotions are determined by physiological arousal and its cognitive interpretation.