The Management of Arkansas Corporation Is Considering the Purchase of a New

question 111

Multiple Choice

The management of Arkansas Corporation is considering the purchase of a new machine costing $490,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability of this investment: The net present value for this investment is

• A) $36,400
• B) $55,200
• C) $(16,170)
• D) $(126,800)

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Definitions:

Tentative Explanation

An initial, provisional theory or hypothesis intended to account for certain observations, subject to further investigation and confirmation.

Scientific Theory

A well-substantiated explanation of some aspect of the natural world, based on a body of facts that have been repeatedly confirmed through observation and experiment.

Statistical Validation

The process of evaluating the correctness and reliability of a statistical model or measurement through rigorous testing and analysis.

Critical Thinking

The goal of critically examining and assessing a matter to come to a decision.