A Firm Is Considering a Project with an Annual Cash

question 108

Multiple Choice

A firm is considering a project with an annual cash flow of $400,000.The project would have a seven-year life,and the company uses a discount rate of 10%.What is the maximum amount the company could invest in the project and have the project still be acceptable?

• A)$200,000
• B)$718,200
• C)$1,400,000
• D)$1,947,200

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Definitions:

Commercial Loans

Commercial loans are debt-based funding agreements between businesses and financial institutions, used primarily for business purposes.

Truth In Lending Act

Legislation at the national level that facilitates educated decisions about consumer credit use by demanding information on its terms and fees be made available.

Unauthorized Use

The use of property, resources, or confidential information without permission from the rightful owner or authority.

Maximum Liability

The highest amount for which a party can be held financially responsible under a contract or legal agreement.