(Ignore Income Taxes in This Problem

question 18

Multiple Choice

(Ignore income taxes in this problem.) Rushforth Manufacturing has $90,000 to invest in either Project A or Project B. The following data are available on these projects: Both projects will have a useful life of 6 years. At the end of 6 years, the working capital investment will be released for use elsewhere. Rushforth's required rate of return is 14%.
-The net present value of Project A is:

• A)$27,341
• B)$94,000
• C)$71,000
• D)$117,341

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Definitions:

Per Unit

A term that refers to expressing costs, revenues, or any other financial metric on a per unit of production or per unit of sale basis.

Fixed Manufacturing Overhead

These are production costs that do not change with the level of manufacturing activity, such as rent for factory premises.

Inventories

Assets held for sale in the ordinary course of business, or materials to be used or consumed in the production process.

Deferred

Postponed or delayed actions or transactions, often referring to income or expenses that will be recognized in a future accounting period.