Wal-Mart\'s management team discloses that nearly $400,000 in research and devel

Question

Wal-Mart's management team discloses that nearly $400,000 in research and development costs were inclined before a new project proposal was put together. What effect would this have on the project's NPV? Sherwood Packing has sales of $3.2 million and cost of goods sold is 65% of sales. If Sherwood's inventory averaged $0.4 million last year, what was the length of the inventory conversion period? Tank Johnson just deposited his $75,000 game check in his checking account. The account bears a 1.5% annually and Tank desires to save his money for the pending lockout for 2 years. How much will he have after 2 years? Justin Ross, an executive at American Airlines, is analyzing a new project for their Dallas operations. He is concerned about how soon the project will generate cash flows to cover the initial investment. He has asked you to calculate the discounted payback for the project. The expected net cash flows are shown below: Assume that the project's required rate of return is 10%. What is the discounted payback period? What is the purpose of a lockbox?

Explanation / Answer

40. Cost incurred on research and development are sunk costs. That is not considered in calculating NPV. Answer A. is correct

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