Use this information to answer questions 13-15.
Big Can, Inc., a U.S. firm, manufactures and sells aluminum cans worldwide. Because of a rising price of aluminum in the U.S., the company is considering to build a new plant in Europe. The plant will cost €20 million to build. Assume that the plant will have a life of 3 years before it is confiscated by the European government zero salvage value and the discount rate of the cash flows is 10%. Consider the following cash flows for this project.
Table 9.2

-Refer to Table 9.2.Based on the net present value,
A) the project can be accepted because the net present value is positive.
B) the project should be rejected because the net present value is negative.
C) the project can be accepted because the net present value is negative.
D) the project should be rejected because the net present value is positive.

Question

Use this information to answer questions 13-15.
Big Can, Inc., a U.S. firm, manufactures and sells aluminum cans worldwide. Because of a rising price of aluminum in the U.S., the company is considering to build a new plant in Europe. The plant will cost €20 million to build. Assume that the plant will have a life of 3 years before it is confiscated by the European government zero salvage value and the discount rate of the cash flows is 10%. Consider the following cash flows for this project.
Table 9.2
 
-Refer to Table 9.2.Based on the net present value,
A) the project can be accepted because the net present value is positive. 
B) the project should be rejected because the net present value is negative. 
C) the project can be accepted because the net present value is negative. 
D) the project should be rejected because the net present value is positive.

Quizplus · Accepted Answer

The Answer is B

Use This Information to Answer Questions 13-15