A Company Projects an Increase in Net Income of $30,000

question 81

Multiple Choice

A company projects an increase in net income of $30,000 each year for the next five years if it invests $300,000 in new equipment. The equipment has a five-year life and an estimated salvage value of $100,000. What is the annual rate of return on this investment?

• A) 10%
• B) 15%
• C) 20%
• D) 25%

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Definitions:

Wide Distribution

The extensive spreading of something, such as a product, phenomenon, or piece of information, across a large area or amongst a large number of people.

Predictive Validity

The extent to which a score on a scale or test predicts future performance on a related outcome.

Reliability

The degree to which an assessment tool produces stable and consistent results over repeated measures or uses.

Biased Exam

An examination that unfairly advantages or disadvantages a group of individuals based on irrelevant factors such as race, gender, or socioeconomic status.