Determine If This Project Is Profitable Under the Following Circumstances

Determine if this project is profitable under the following circumstances: A company is undertaking a new project. The specialized equipment that needs to be bought has an expense of $28,000. In addition, permits and licenses are required which will cost $1500. Employee training will be an additional $46,000 expenditure. To produce the merchandise, raw materials are required that will cost $48,000 and this project will generate cash flows of $25,000 per year for 10 years. The cost of capital for this project is 12%.

A) Yes, the project is acceptable with a net present value equaling about $17,756.
B) Yes, the project is acceptable with a net presernt value equaling about $48,257.
C) No, the project is not acceptable with a net present value equaling about -$15,275.
D) No, the project is not acceptable with a net present value equaling about -$18,000.

Correct Answer:

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