A Project Manager Is Using the Net Present Value Method

question 64

Multiple Choice

A project manager is using the net present value method to make the final decision on which project to undertake.The company has a 15% required rate of return and expects a 5% rate of inflation for the following four years.What is the NPV of a project that has cash flows as shown in the table? $$\begin{array} { | l | l | } \hline \text { Year } & \text { Cash Flow } \\\hline 0 & - \$ 350,000 \\\hline 1 & \$ 50,000 \\\hline 2 & \$ 80,000 \\\hline 3 & \$ 100,000 \\\hline 4 & \$ 150,000 \\\hline\end{array}$$

• A) $4.955
• B) $42,586
• C) -$23,667
• D) -$122,569

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Definitions:

Unit Sales

The quantity of individual items or products sold by a company, often used to measure business performance.

Net Operating Income

A measure of a company's profitability, calculated by subtracting operating expenses from gross income.

Special Order

A one-time customer order often requiring customization or a deviation from standard production practices.

Modifications

Modifications refer to changes or alterations made to a product or system, often to improve functionality, efficiency, or to tailor it to specific needs or preferences.