Question

A capacity alternative has an initial cost of $50,000 and cash flow of $20,000 for each of the next four years. If the cost of capital is 5 percent, the net present value of this investment is

A) greater than $80,000

B) greater than $130,000

C) less than $30,000

D) Impossible to calculate, because no interest rate is given.

E) Impossible to calculate, because variable costs are not known.

Answer

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