Ernestine Is Analyzing a 4-Year Project with an Initial Cost

Multiple Choice

Ernestine is analyzing a 4-year project with an initial cost of $87,000,a required rate of return of 14 percent,and a chance of success of 4 percent.If the project succeeds,the annual cash flow will be $1,789,000.If the project fails,the annual cash flow will be -$131,000.The project can be shut down after the first 2 years but all monies invested will be lost.None of the initial cost can be recouped after 4 years.What is the net present value of this project at Time 0?

A) $150,050.32
B) -$49,666.71
C) -$238,212.04
D) -$85,578.77
E) $59,412.95