Czlapinski Corporation Is Considering a Capital Budgeting Project That Would

question 85

Multiple Choice

Czlapinski Corporation is considering a capital budgeting project that would require an initial investment of $440,000 and working capital of $32,000. The working capital would be released for use elsewhere at the end of the project in 4 years. The investment would generate annual cash inflows of $147,000 for the life of the project. At the end of the project, equipment that had been used in the project could be sold for $11,000. The company's discount rate is 7%. The net present value of the project is closest to:

• A)$66,282
• B)$34,282
• C)$159,000
• D)$58,698

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Definitions:

Artificially High Amounts

Figures or values that have been inflated through accounting practices or activities that do not reflect the true economic value or performance.

Consolidated Financial Statements

Financial statements that aggregate the financial information of a parent company and its subsidiaries, presenting it as if the group were a single entity.

Gross Profit

The financial gain obtained after subtracting the cost of goods sold from the total revenue generated from sales.

Voting Stock

Shares that give the shareholder the right to vote on company matters, such as electing directors or approving corporate policies.