Performance Needlework Needs to Purchase a New Machine Costing $1

question 95

Multiple Choice

Performance Needlework needs to purchase a new machine costing $1.25 million.Management is estimating the machine will generate cash inflows of $175,000 the first year and $ 500,000 for the following three years.If management requires a minimum 10 percent rate of return, should the firm purchase this particular machine based on its IRR? Why or why not?

• A)Yes, because the IRR is 10.75 percent
• B)Yes, because the IRR is 11.28 percent
• C)No, because the IRR is 10.75 percent
• D)No, because the IRR is 11.28 percent
• E)The answer cannot be determined as there are multiple IRRs

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Definitions:

Quality Control Program

A component of a quality assurance program that focuses on ensuring accuracy in laboratory test results through careful monitoring of test procedures.

Accuracy

Accuracy is the degree to which the result of a measurement, calculation, or specification conforms to the correct value or standard.

Test Results

The outcome or findings from various types of medical tests used to detect, diagnose, or monitor diseases, conditions, or the function of organs and systems.

Common Fate

A principle in Gestalt psychology stating that elements moving in the same direction are perceived as more related than elements moving in different directions or stationary.