Reference: 10-04 The Finney Company Is Reviewing the Possibility of Remodelling One

question 24

True/False

Reference: 10-04
The Finney Company is reviewing the possibility of remodelling one of its showrooms and buying some new equipment to improve sales operations. The remodelling would cost $120,000 now and the useful life of the project is 10 years. Additional working capital needed immediately for this project would be $30,000; the working capital would be released for use elsewhere at the end of the 10-year period. The equipment and other materials used in the project would have a salvage value of $10,000 in 10 years. Finney's discount rate is 16%.
-A major limitation of the payback method is that it cannot be used in situations where future budgeted cash flows are uneven.

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Definitions:

Reticular Formation

Midbrain area in which nuclei and fiber pathways are mixed, producing a netlike appearance; associated with sleep–wake behavior and behavioral arousal; also called the reticular activating system (RAS).

Sleep

A naturally recurring state of mind and body characterized by altered consciousness, relatively inhibited sensory activity, and inhibition of nearly all voluntary muscles.

Orienting Responses

The instinctive redirection of attention toward a new or important stimulus, often involving physical positioning toward the stimulus.

Superior and Inferior Colliculi

Paired structures in the midbrain involved in visual and auditory reflexes; the superior colliculi in processing visual information and inferior colliculi in processing auditory information.