A New,more Efficient Machine Will Last 4 Years and Allow

question 106

Multiple Choice

A new,more efficient machine will last 4 years and allow inventory levels to decrease by $100,000 during its life.At a cost of capital of 13%,how does the net working capital change affect the project's NPV?

• A) NPV increases by $38,668.
• B) NPV increases by $61,330.
• C) NPV increases by $100,000.
• D) NPV increases by $138,668.

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Definitions:

Consumer's Risk

The probability of accepting a batch of products that fails to meet quality standards during the sampling or inspection process, typically associated with Type II statistical errors.

Process Central Line

A line on a control chart representing the average or expected value of the process being monitored.

X-bar Chart

A type of control chart used for monitoring the mean value of a process over time.

Natural Variation

Variability that affects every production process to some degree and is to be expected; also known as common cause.