A Capacity Alternative Has an Initial Cost of $50,000 and Cash

question 61

Multiple Choice

A capacity alternative has an initial cost of $50,000 and cash flow of $20,000 for each of the next four years. If the cost of capital is 5 percent, the net present value of this investment is approximately

• A) $20,920
• B) $26,160
• C) $49,840
• D) $70,920
• E) $106,990

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Definitions:

Scatter Diagram

A visual depiction employing points to illustrate the connection between two numerical variables.

Cov(X,Y)

The covariance between two variables X and Y, measuring how changes in one variable are associated with changes in the other.

Sample Slope Coefficient

A parameter in a linear regression equation that represents the change in the dependent variable for a one-unit change in the independent variable.

Residual

The difference between the observed and the predicted value in a regression model.