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Please Refer to the Following Data About an Investment Opportunity

Question 124

Multiple Choice

Please refer to the following data about an investment opportunity:
 Initial investment $1,000,000 Discount rate 7% Yearly cash flows  Year 1 $250,000 Year 2 $350,000 Year 3 $400,000 Year 4 $150,000\begin{array} { | r | r | } \hline \text { Initial investment } & \$ 1,000,000 \\\hline \text { Discount rate } & 7 \% \\\hline \text { Yearly cash flows } & \\\hline \text { Year 1 } & \$ 250,000 \\\hline \text { Year 2 } & \$ 350,000 \\\hline \text { Year 3 } & \$ 400,000 \\\hline \text { Year 4 } & \$ 150,000 \\\hline\end{array}
Refer to the following PV factors:
 Preant Value of $15%6%7%8%9%10%10.9520.9430.9350.9260.9170.90920.9070.8900.8730.8570.8420.82630.8640.8400.8160.7940.7720.75140.8230.790.7630.7350.7080.68350.7840.7470.7130.6810.6500.62160.7460.7050.6660.6300.5960.56470.7110.6650.6230.5830.5470.51380.6770.6270.5820.5400.5020.46790.6450.5920.5440.5000.4600.424100.6140.5580.5080.4630.4220.386\begin{array} { | r | r | r | r | r | r | r | } \hline \text { Preant Value of } & & & & & & \\\$1\\\hline &5\%&6\%&7\%&8\%&9\%&10\%\\\hline 1 & 0.952 & 0.943 & 0.935 & 0.926 & 0.917 & 0.909 \\\hline 2 & 0.907 & 0.890 & 0.873 & 0.857 & 0.842 & 0.826 \\\hline 3 & 0.864 & 0.840 & 0.816 & 0.794 & 0.772 & 0.751 \\\hline 4 & 0.823 & 0.79 & 0.763 & 0.735 & 0.708 & 0.683 \\\hline 5 & 0.784 & 0.747 & 0.713 & 0.681 & 0.650 & 0.621 \\\hline 6 & 0.746 & 0.705 & 0.666 & 0.630 & 0.596 & 0.564 \\\hline 7 & 0.711 & 0.665 & 0.623 & 0.583 & 0.547 & 0.513 \\\hline 8 & 0.677 & 0.627 & 0.582 & 0.540 & 0.502 & 0.467 \\\hline 9 & 0.645 & 0.592 & 0.544 & 0.500 & 0.460 & 0.424 \\\hline 10 & 0.614 & 0.558 & 0.508 & 0.463 & 0.422 & 0.386 \\\hline\end{array}
What is the NPV of the project?


A) $150,000 negative
B) $19,000 positive
C) $21,455 positive
D) $19,850 negative

Correct Answer:

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