Chase,IncIs Considering an Eight-Year Project That Has an Initial After-Tax

question 34

Multiple Choice

Chase,Inc.is considering an eight-year project that has an initial after-tax outlay or after-tax cost of $180,000.The future after-tax cash inflows from its project for years 1 through 8 are the same at $35,000.Chase uses the net present value method and has a discount rate of 12%.Will Chase accept the project?

• A)Chase accepts the project because the NPV is over $10,000.
• B)Chase accepts the project because the NPV is about $6,141.
• C)Chase rejects the project because the NPV is about -$6,133.
• D)Chase rejects the project because the NPV is below -$7,000.

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Definitions:

Stockholders

Individuals or entities that own shares in a corporation, thereby having an ownership interest in the company.

Stock Repurchase

When a company buys back its own shares from the marketplace, reducing the amount of outstanding stock on the open market.

Dividend

A portion of a company's earnings distributed to shareholders, usually in the form of cash or additional stocks.

Depressed Stock Price

Refers to the condition of a stock's market price being significantly lower than its perceived value or historical averages, often due to external factors.