The net present value of capital budgeting project with an initial cost of $5,000 that generates $1,000 after-tax cash flows each year for ten years is $1,710 when discounted at 8 percent.

Question

Quizplus · Accepted Answer

The statement describes a positive net present value (NPV) calculation, indicating that the project generates more value than it costs. The $1,710 figure suggests that the project generates a return that is greater than the 8 percent discount rate used to calculate the NPV.

The Net Present Value of Capital Budgeting Project with an Initial