Geronimo is considering a project that has an initial after tax outlay or after

Question

Geronimo is considering a project that has an initial after tax outlay or after tax cost of $220,000. The respective future cash inflow from its 4 year project for years 1 through 4 are: $50,000, $60,000, $70,000 and $80,000. Geronimo uses the net present value method and has a discount rate of 11%. Will Geronimo accept the project? A) Geronimo accepts the project because the NPV is greater than $10,000 B) Geronimo accepts the project because the NPV is about -$22,375.73 C) Geronimo accepts the project because the NPV is about -$12,375.60 D) Geronimo accepts the project because the NPV is about -$2,375.60

Explanation / Answer

Hi, If you like my answer rate me lifesaver first...that way only I can earn points. Thanks NPV = -$220000 + $50000/1.11 +$60000/1.11^2 +$70000/1.11^3 +$80000/1.11^4 = -$22375.73 Geronimo should Ideally reject the project, but since the only viable option is C, I would go with C.

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