(Ignore income taxes in this problem.) White Company's required rate of return on capital budgeting projects is 12%. The company is considering an investment opportunity which would yield a cash flow of $10,000 in five years. What is the most that the company should be willing to invest in this project?
A) $36,050
B) $2,774
C) $17,637
D) $5,670

Question

Quizplus · Accepted Answer

The present value (PV) of the future cash flow can be calculated using the formula: PV = FV / (1 + r)^n, where FV is the future value ($10,000), r is the rate of return (0.12), and n is the number of years (5). This gives PV = $10,000 / (1.12)^5 = $5,670.

(Ignore Income Taxes in This Problem