A Machine Will Generate After Tax Revenues of $1331 at the End

question 58

Multiple Choice

A machine will generate after tax revenues of $1331 at the end of each year for 3 years,after which it will be worthless. (Its scrap value will only cover the cost of its removal) . The interest rate available to the firm on risk-free bank accounts or bonds is 10 percent. The machine is a worthwhile investment if its purchase price is less than

• A) $3,993.00
• B) $4,846.17
• C) $3,310.00
• D) $4,392.30
• E) $3,630.00

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Definitions:

T-distribution

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

Sampling Distribution

The probability distribution of a given statistic based on a random sample.

Independent Sample Variances

A measure of the variability in each of two or more independent samples, used in hypothesis testing to assess the assumption of equal variances.

Normal Populations

Populations that are distributed in a way that forms a symmetrical, bell-shaped curve when graphed, with most members being close to the average.