Which of the Following Is a Correct Equation to Solve

question 104

Multiple Choice

Which of the following is a correct equation to solve for the NPV of the project that has an initial outlay of $30,000, followed by incremental cash inflows in the next three years of $15,000, $20,000, and $30,000? Assume a discount rate of 10%.

• A)NPV = −$30,000 + $15 000(1.10)1 + $20 000(1.10)2 + $30 000(1.10)3
• B)NPV = −$30,000 + $15 000/(1.10)1 + $20 000/(1.10)2 + $30 000/(1.10)3
• C)NPV = −$30,000 + $15 000/(1.01).10 + $20 000/(1.02).10 + $30 000/(1.03).10
• D)NPV = −$30,000 + $15 000/(1.1).10 + $20,000(1.2).10 + $30,000(1.3).10

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Definitions:

Missing Factor

In mathematics, the unknown quantity in a multiplication problem that, when multiplied by a known quantity, gives a specific product.

Multiply

The mathematical operation of increasing one number by another number.

Combine

The process of adding or merging various elements or mathematical expressions together.

Simplify

The process of altering an expression or equation to make it easier to work with, often by combining like terms or applying mathematical operations.