Not Wanting to Risk Poor Sales for a New Soda

question 778

Multiple Choice

Not wanting to risk poor sales for a new soda flavor, a company decides to run one more taste test
On potential customers, this time requiring a higher approval rating than they had for earlier tests.
This higher standard of proof will increase
I. the risk of Type I error
II. the risk of Type II error
III. power

• A) I and III
• B) II only
• C) III only
• D) I only
• E) I and II

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Definitions:

Future Cash Flows

Estimated monetary gains or expenditures that a company expects to receive or pay out in the future.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life in equal installments.

Mutually Exclusive

A statistical term describing two or more events that cannot occur simultaneously.

Salvage Value

The estimated residual value of an asset at the end of its useful life, important for depreciation calculations.