Use This Information to Answer Questions 13-15

question 17

Multiple Choice

Use this information to answer questions 13-15.
Big Can, Inc., a U.S. firm, manufactures and sells aluminum cans worldwide. Because of a rising price of aluminum in the U.S., the company is considering to build a new plant in Europe. The plant will cost €20 million to build. Assume that the plant will have a life of 3 years before it is confiscated by the European government zero salvage value and the discount rate of the cash flows is 10%. Consider the following cash flows for this project.
Table 9.2

-Refer to Table 9.2.Based on the net present value,

• A) the project can be accepted because the net present value is positive.
• B) the project should be rejected because the net present value is negative.
• C) the project can be accepted because the net present value is negative.
• D) the project should be rejected because the net present value is positive.

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Definitions:

Normal Rate

Refers to the standard or usual level at which a particular process occurs or is set, often used in financial contexts such as interest rates.

Return

The gain or loss on an investment over a specified period, expressed as a percentage of the investment’s cost.

Increasing-Cost Industry

An industry in which production costs increase as output expands, often due to factors like resource depletion or increased demand for inputs.

Entry

The act of a new competitor joining a market, which can influence market dynamics, prices, and competitive strategies.