Use the Information for the Question(s)below

question 9

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 dollar value should the NPV profile cross the vertical axis?

• A)$780,000
• B)$1,000,000
• C)Cannot be determined because inadequate information is given.
• D)The vertical axis crossing point cannot be calculated since the cash inflows are a perpetuity.

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Definitions:

Intent Necessary

The requirement in law and ethics that an action must be accompanied by a conscious aim or purpose to perform that action.

Commit A Tort

The act of violating a duty or law, resulting in harm or injury to another, which can be redressed by a lawsuit for damages.

Commit A Crime

The act of engaging in an activity that is forbidden by law and punishable by the state or other authority.

Variance

In law, a variance is a granted deviation from the set rules of zoning or building regulations; in statistics, it measures the spread of a set of numbers.