A Project Requires an Investment of $900 Today

Multiple Choice

A project requires an investment of $900 today. It can generate sales of $1,100 per year forever. Costs are $600 for the first year and will increase by 20 percent per year. (Assume all sales and costs occur at year-end [i.e., costs are $600 @ t = 1].) The project can be terminated at any time without cost. Ignore taxes and calculate the NPV of the project at a 12 percent discount rate.

A) $65.00
B) $57.51
C) $100.00
D) It cannot be calculated as g > r.