A Given Project Requires a $25,000 Investment and Is Expected

question 36

Multiple Choice

A given project requires a $25,000 investment and is expected to generate end-of-period annual cash inflows as follows:
$$\begin{array} { c c c c } \text { Year 1 } & \text { Year 2 } & \text { Year 3 } & \text { Total } \\\$ 44,000 & \$ 15,000 & \$ 6,000 & \$ 25,000\end{array}$$
Assuming a discount rate of 10%, what is the net present value of this investment? Selected present value factors for a single sum are shown in the table below.
$$\begin{array} { c c c } \mathrm { i } = 10 \% & \mathrm { i } = 10 \% & \mathrm { i } = 10 \% \\\mathrm { n } = 1 & \mathrm { n } = 2 & \mathrm { n } = 3 \\\hline .9091 & .8264 & .7513\end{array}$$

• A) $6,217.50
• B) ($4,459.80)
• C) ($6,217.50)
• D) $8,275.00
• E) $0.00

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Definitions:

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Platforms where stocks (shares of ownership in companies) and other securities are bought and sold by investors.

Stakeholder

Anyone who potentially has a claim on a firm.

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Holding shares in a company, which represent a portion of the company's capital and give certain rights to the shareholder.

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The ability of shareholders to vote on corporate matters, such as the election of the board of directors.