Question
Moon River Adventures is considering the following new project. Project inflows are expected to be $20,000 per year, and project outflows are expected to be
Moon River Adventures is considering the following new project. Project inflows are expected to be $20,000 per year, and project outflows are expected to be $14,000 per year. These amounts will begin in one year and will last for a total of two consecutive years. The project will require an immediate investment of $6,000 that will be depreciated over two years on a straight line basis to zero. Projects of similar risk offer a 25% required return. The firms tax rate is 30%. Which of the following comes closest to the projects net present value (NPV)?
a. $48
b. $4,200
c. $1,344
d. $5,750
e. ($2,851)
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