Morgan, 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. Morgan uses the net present value method and has a discount rate of 12%. Will Morgan accept the project?
A) Morgan accepts the project because the NPV is over $10,000.
B) Morgan accepts the project because the NPV is about $6,141.
C) Morgan rejects the project because the NPV is about -$6,133.
D) Morgan rejects the project because the NPV is below -$7,000.

Question

Quizplus · Accepted Answer

The NPV is calculated by discounting the future cash inflows at the given discount rate and subtracting the initial investment. The NPV is approximately -$6,133, indicating the project should be rejected.