A Company Is Contemplating Investing in a New Piece of Manufacturing

question 127

Multiple Choice

A company is contemplating investing in a new piece of manufacturing machinery. The amount to be invested is $210,000. The present value of the future cash flows is $225,000. The company's desired rate of return used in the present value computations was 12%. Which of the following statements is true?

• A)The project should not be accepted because the net present value is negative.
• B)The internal rate of return on the project is less than 12%.
• C)The internal rate of return on the project is more than 12%.
• D)The internal rate of return on the project is equal to 12%.

---

Definitions:

Imaginal System

A psychological concept referring to the capacity of the mind to imagine, visualize, or create mental images.

Mental Picture

A visual representation in the mind of objects, people, or situations that are not currently being viewed.

Imitation

The action of copying or reproducing someone else’s behavior, actions, or expressions, often as a method of learning or social interaction.

Encode

The process of converting information into a form that can be stored in the memory, such as transforming thoughts into language.