54. A proposed project requires an initial cash outlay of $749,000 for equipment and an
additional cash outlay of $48,500 in year one to cover operating costs. During years 2 through
4, the project will generate cash inflows of $354,000 a year. What is the net present value of
this project at a discount rate of 16 percent?
A.
-$105,427
B.
-$41,209
C.
$67,333
D.
$128,612
E.
$239,602

AACSB: Analytic
Bloom's: Analysis
Difficulty: Basic
Learning Objective: 08-04 Evaluate proposed investments by using the net present value criterion.
Section: 8.1
Topic: Net present value
8-30

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Chapter 08 - Net Present Value and Other Investment Criteria
55. Curtis is considering a project with cash inflows of $918, $867, $528, and $310 over the
next four years, respectively. The relevant discount rate is 11 percent. What is the net present
value of this project if it the start up cost is $2,100?

AACSB: Analytic
Bloom's: Analysis
Difficulty: Basic
Learning Objective: 08-04 Evaluate proposed investments by using the net present value criterion.
Section: 8.1
Topic: Net present value
56. Charles Henri is considering investing $36,000 in a project that is expected to provide him
with cash inflows of $12,000 in each of the first two years and $18,000 for the following year.
At a discount rate of zero percent this investment has a net present value of _____, but at the
relevant discount rate of 17 percent the project's net present value is _____.

AACSB: Analytic
Bloom's: Analysis
Difficulty: Intermediate
Learning Objective: 08-04 Evaluate proposed investments by using the net present value criterion.
Section: 8.1
Topic: Net present value
8-31

Chapter 08 - Net Present Value and Other Investment Criteria
57. Joe and Rich are both considering investing in a project with the following cash flows. Joe
is content earning a 9 percent return but Rich desires a return of 16 percent. Who, if either,
should accept this project?

AACSB: Analytic
Bloom's: Analysis
Difficulty: Intermediate
Learning Objective: 08-04 Evaluate proposed investments by using the net present value criterion.
Section: 8.1
Topic: Net present value
8-32

Chapter 08 - Net Present Value and Other Investment Criteria