Accounting Multiple Choice Question – 12 November 2023

Alex Trading Ltd is evaluating whether to invest in a project.

The table shows estimates for the project with a discount factor (8%)

initial investment
year 0 – £58,500 == > DCF 1.000

projected cash flows
year 1 – £37,300 == > DCF 0.926
year 2 – £21,200 == > DCF 0.857
year 3 – £19,500 == > DCF 0.794

What is the net present value (NPV) of the project to Alex Trading Ltd?

Select ONE answer:

1. -£19,500
2. -£9,691
3. +£9,691
4. +£19,500

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct – Minus £58,500 + (£37,300 * 0.926) + (£21,200 * 0.857) + (£19,500 * 0.794)
4. Not correct

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