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

question 45

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%.
-One of the strengths of the simple rate of return method is that it uses data about cash flows rather than accounting net income.

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Definitions:

T Distribution

A probability distribution used in statistics that arises when estimating the mean of a normally distributed population in situations where the sample size is small and population standard deviation is unknown.

Sample Size

The number of observations or data points that are used in a statistical sample.

Margin of Error

An expression of the amount of random sampling error in a survey's results, which describes the range that the true value lies within with a certain level of confidence.