A Capacity Alternative Has an Initial Cost of $50,000 and Cash

question 85

Multiple Choice

A capacity alternative has an initial cost of $50,000 and cash flow of $20,000 for each of the next four years.If the cost of capital is 5 percent,what is the approximate net present value of this investment?

• A)$20,920
• B)$26,160
• C)$49,840
• D)$70,920
• E)$106,990

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Definitions:

Factory Machine Usage

The extent to which manufacturing equipment is utilized during the production process, often impacting efficiency and costs.

Variable Costs

Expenditures that change in direct correlation with production levels or sales figures.

Rent

Rent is the payment made by a tenant to a landlord for the use of a property, equipment, or other assets for a specified period.

Warehouse

A warehouse is a large storage building where goods are stored before they are distributed for sale or further processed.