(Net Present Value Table Required)Lester Manufacturing Is Conducting Preliminary Research

question 121

Multiple Choice

(Net present value table required) Lester Manufacturing is conducting preliminary research into installing a geothermal heat pump to heat and cool its factories and offices. The initial cost of installing the new system is $275,000; however, Lester will save $55,000 annually on its heating and cooling costs. The system has an expected life of 15 years. What is the net present value (NPV) of the project, assuming a discount rate of 8%?
Present Value of $1
Present Value of Annuity of $1

• A)$195,745
• B)-$195,745
• C)$470,745
• D)$275,000

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Definitions:

Alternative

Refers to the alternative hypothesis in statistical testing, which contrasts the null hypothesis by suggesting there is a significant effect or difference.

T-statistic

A ratio used in hypothesis testing that compares the difference between an observed sample mean and a hypothetical population mean to the standard error of the mean.

Alpha

A coefficient that often represents the level of significance in hypothesis testing, marking the threshold for rejecting the null hypothesis.

Critical Value

A point on a statistical distribution that represents the threshold for significance testing, helping decide whether to reject the null hypothesis.