Michelotti Inc

question 9

Multiple Choice

Michelotti Inc. is considering an investment project that would require an initial investment of $140,000 and that would last for 7 years. The annual cash receipts from the project would be $105,000 and the annual cash expenses would be $47,000. The equipment used in the project could be sold at the end of the project for a salvage value of $7,000. The company's tax rate is 30%. For tax purposes, the entire initial investment will be depreciated over 5 years without any reduction for salvage value. The company uses a discount rate of 19%.
-The net present value of the project is closest to:

• A)$11,914
• B)$37,601
• C)$10,464
• D)$34,151

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Definitions:

Regression Analysis

A statistical approach used to analyze the connection between a dependent variable and one or more independent variables.

Standard Deviation

Indicates how much the individual data points in a data set generally deviate from the mean of the data.

Mean

The mean of a collection of numbers, found by summing all the numbers and then dividing by the total number of values.

Standard Deviation

An indicator of the degree of unevenness or spread among values in a statistical set.