The Local School Board Is Considering the Purchase of a Computer

question 16

Multiple Choice

The local school board is considering the purchase of a computer. It will cost $100,000 and will be sold back to the dealer at the end of 6 years for $8,000. If the required rate of return is 14%, what is the minimal annual cost saving required to justify the purchase? Ignore income taxes.

• A) $25,714
• B) $23,142
• C) $24,776
• D) $23,656

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Definitions:

Subtract

The action or method of deducting one number or quantity from another.

Variance

A statistical measure of the dispersal or spread of a set of numbers, indicating how much the numbers vary from the average of the set.

Represent

To depict or stand in for a population or set of data in a study or analysis.

Variability

The extent to which data points in a statistical distribution or dataset spread out from the mean or median.