Aviary,Inc.is considering a five-year project that has initial after-tax outlay or after-tax cost of $170,000.The future after-tax cash inflows from its project for years 1 through 5 are $45,000 for each year.Aviary uses the net present value method and has a discount rate of 11.25%.Will Aviary accept the project?
A)Aviary accepts the project because the NPV is about $5,455.
B)Aviary accepts the project because the NPV is about $165,275.
C)Aviary rejects the project because the NPV is about -$4,725.
D)Aviary rejects the project because the NPV is about -$154,725.

Question

Quizplus · Accepted Answer

The NPV is calculated by discounting the future cash inflows at the given discount rate and subtracting the initial outlay. The NPV is negative, indicating the project should be rejected.