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You Are Interested in Purchasing a New Car

question 52

Multiple Choice

You are interested in purchasing a new car. One of the many points you wish to consider is the resale value of the car after 5 years. Since you are particularly interested in a certain foreign sedan, you decide to estimate the resale value of this car with a 90% confidence interval. You manage to obtain data on 17 recently resold 5-year-old foreign sedans of the same model. These 17 cars were resold at an average price of $12,320 with a standard deviation of $600. Suppose that the interval is calculated to be ($12,065.92, $12,574.08) . How could we alter the sample size and the confidence coefficient in order to guarantee a decrease in the width of the interval?

Describe the superiority of the NPV rule over the IRR rule in case of conflicting investment decisions.

Explain the concept and calculation of the internal rate of return (IRR).

Understand the reinvestment assumptions implicit in the NPV and IRR methods.

Identify incremental cash flows associated with capital budgeting projects.

Definitions:

Glucose

A simple sugar that is an important energy source in living organisms and is a component of many carbohydrates.

Nutrients

Substances obtained from food that are essential for maintaining bodily functions and growth, including vitamins, minerals, carbohydrates, proteins, and fats.

Testosterone

A steroid hormone that plays a key role in the development of male reproductive tissues, as well as promoting secondary sexual characteristics and affecting moods.

Homosexual Males

Males who are sexually and/or romantically attracted to other males.