Margarite's Enterprises Is Considering a New Project That Will Require

question 39

Multiple Choice

Margarite's Enterprises is considering a new project that will require $345,000 for new fixed assets,$160,000 for inventory,and $35,000 for accounts receivable.Short-term debt is expected to increase by $110,000.The project has a 5-year life.The fixed assets will be depreciated straight-line to zero over the life of the project.At the end of the project,the fixed assets can be sold for 25 percent of their original cost.The net working capital returns to its original level at the end of the project.The project is expected to generate annual sales of $550,000 and costs of $430,000.The tax rate is 35 percent and the required rate of return is 15 percent.
What is the initial cost of this project?

• A)$330,000
• B)$430,000
• C)$580,000
• D)$360,000
• E)$650,000

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Definitions:

Triarchic Theory

A theory of intelligence proposed by Robert Sternberg that suggests there are three types of intelligence: analytical, creative, and practical.

Analytic

Pertaining to or involving the analysis of components or logical reasoning.

Practical Intelligence

The ability to solve everyday problems through insightful understanding of human behaviors and effective use of knowledge and skills.

Creative

The ability or quality of generating new and original ideas, solutions, or artistic expressions.