Albury Company Is Adding a New Assembly Line at a Cost

question 41

Multiple Choice

Albury Company is adding a new assembly line at a cost of $8.5 million. The company expects the project to generate cash flows of $2 million, $3 million, $4 million, and $5 million over the next four years. Its cost of capital is 16 percent. Net present value: What is the net present value of this project?

• A) $645,366
• B) $1,213,909
• C) $905,888
• D) $777,713

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Definitions:

Credit Sales

Transactions where the payment is deferred to a future date, allowing the buyer to receive goods or services before payment is made.

Service Charge

A fee charged to customers for a specific service provided, often seen in banking, hospitality, and service industries.

Factor

A factor refers to an element or condition that contributes to a result; in finance, it could also mean a firm that buys receivables from businesses.

Selling Expense

Costs related to the selling of products or services, including advertising, sales staff salaries, and commissions.