Bevans Corporation Is Considering a Capital Budgeting Project That Would

question 157

Multiple Choice

Bevans Corporation is considering a capital budgeting project that would require an initial investment of $190,000. The investment would generate annual cash inflows of $58,000 for the life of the project, which is 4 years. The company's discount rate is 7%. The net present value of the project is closest to:

• A)$190,000
• B)$6,446
• C)$196,446
• D)$42,000

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Definitions:

Shutting-Down

A short-run decision by a firm to halt production because operating would lead to a loss greater than the fixed costs.

Hostages

Individuals held captive by others as security for the fulfillment of specific conditions or demands.

Trading Partner

An entity or country that engages in commerce or trade with another, often under agreed terms or through treaties.

Held Up

Delayed or stopped by something or someone, causing a pause in progress or movement.