The Mitre Box Company is considering a project with an initial cost of $35,000 a
ID: 2701246 • Letter: T
Question
The Mitre Box Company is considering a project with an initial cost of $35,000 and future cash inflows of $20,000, $15,000, $10,000 and $5,000 over the next four years respectively. If the company requires a 9.5 percent rate of return, should the company accept the project?
No; the NPV is negative.
Yes; the NPV is $3,874.
Yes; the NPV is $5,207.
Yes; the NPV is $6,869.
Cannot be determined from the information given.
No; the NPV is negative.
Yes; the NPV is $3,874.
Yes; the NPV is $5,207.
Yes; the NPV is $6,869.
Cannot be determined from the information given.
Explanation / Answer
NPV = -35000 + 20000/1.095 + 15000/1.095^2 + 10000/1.095^3 + 5000/1.095^4 = 6869 .............Yes, NPV is 6869
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