A Firm Is Considering the Purchase of a Capital Good

question 76

Multiple Choice

A firm is considering the purchase of a capital good that will generate an additional $40,000 income each year for 4 years (after which time the capital good is useless and has no scrap value) . The interest rate is 4 percent. It follows that the firm should not purchase the capital good if its price is greater than (approximately)

• A)$135,800.
• B)$111,004.
• C)$160,200.
• D)$174,915.
• E)$123,318.

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Definitions:

Standard Deviation

A measure of the amount of variation or dispersion of a set of values; a low standard deviation means the values tend to be close to the mean, while a high standard deviation means they are spread out over a wider range.

Delivery Times

The duration it takes for goods or services to be delivered from when an order is placed to when it is received by the customer.

Random Sample

A subset of a statistical population where each member has an equal chance of being chosen.

Variability

The measure of how spread out or scattered the points in a data set are.