Use the Information for the Question(s) Below

question 12

Multiple Choice

Use the information for the question(s) below.
-The owner of a hair salon spends $1,000,000 to renovate its premises, estimating that this will increase her cash flow by $220,000 per year. She constructs the above graph, which shows the net present value (NPV) as a function of the discount rate. At what discount rate does her decision to renovate become untenable?

• A) 3.0%
• B) 3.3%
• C) 4.0%
• D) 4.8%

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Definitions:

Technical Knowledge

Expertise or skills in specific fields, particularly those related to science, engineering, technology, or computing.

Commerce Clause

A provision in the United States Constitution that grants Congress the power to regulate trade between states, with foreign nations, and among Indian tribes.

Article I

Refers to the first article of a constitution, typically outlining the structure and power of the legislative branch in a government.