Question

Valerie just completed analyzing a project. Her analysis indicates that the project will have a six-year life and require an initial cash outlay of $120,000. Annual sales are estimated at $189,000 and the tax rate is 21 percent. The net present value is negative $120,000. Based on this analysis, the project is expected to operate at the:

Answer 1

Answer: Cash break - even point

Step-by-step explanation:

The NPV (net present value) is negative $120,000. Whereas, the initial cash outlay requires $120,000.

The cost of the project is equal to the inital cash flow of the project. Therefore, the project is expected to operate at cash break - even point.