Use the Information for the Question(s)below

question 82

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)4.8%
• B)4.0%
• C)3.0%
• D)3.3%

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Definitions:

Null Hypothesis

A type of hypothesis used in statistics that proposes there is no statistical significance between two variables, or that a statement of no effect or no difference will be true.

Two-Tailed

In hypothesis testing, it refers to the methodology that considers both directions of a possible effect, allowing for investigation of deviations in two opposite directions from the null hypothesis.

Pearson Correlation

A metric that quantifies the linear relationship between two variables, providing a value in the range of -1 to 1.

Negative Number

A number less than zero, typically represented with a minus sign in front, indicating a value opposite to its positive counterpart.