A Project Will Produce Cash Inflows of $1,750 a Year

question 11

Multiple Choice

A project will produce cash inflows of $1,750 a year for four years.The project initially costs $10,600 to get started.In year five,the project will be closed and as a result should produce a cash inflow of $8,500.What is the net present value of this project if the required rate of return is 13.75%?

• A)-$5,474.76
• B)-$1,011.40
• C)-$935.56
• D)$1,011.40
• E)$5,474.76

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Definitions:

Parol Evidence Rule

A legal doctrine that prevents parties to a written contract from presenting extrinsic evidence of terms of the agreement that contradict, modify, or vary the terms of the written contract.

Customized Goods

Products that are tailored to meet the specific requirements or specifications of an individual customer.

Parol Evidence Rule

A legal rule that prevents the introduction of evidence outside the written contract that would alter or contradict its terms.

Integrated Contracts

Legal documents that combine all agreements and terms related to a particular deal or relationship into a single, comprehensive document.