Generro Company Is Considering the Purchase of Equipment That Would

question 91

Multiple Choice

Generro Company is considering the purchase of equipment that would cost $36,000 and offer annual cash inflows of $10,500 over its useful life of 5 years.Assuming a desired rate of return of 12%,is the project acceptable? (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.)

• A) No, since the negative net present value indicates the investment will yield a rate of return below the desired rate of return.
• B) Yes, since the investment will generate $52,500 in future cash flows, which is greater than the purchase cost of $36,000.
• C) Yes, since the positive net present value indicates the investment will earn a rate of return greater than 12%.
• D) The answer cannot be determined.

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Definitions:

Radical Behaviorism

A philosophical doctrine and approach in psychology that emphasizes the study of observable behaviors and their modification without attributing importance to thoughts or feelings.

Reciprocal Determinism

A concept of Albert Bandura's social cognitive theory that suggests individual behavior, environmental factors, and personal cognitive factors, including beliefs, all interact to shape behavior.

External Events

Occurrences happening outside of an individual that can affect mood, behavior, and perceptions.

Internal Factors

Influences that originate within a person, such as beliefs, values, and personal drive.