Use the Information for the Question(s)below

question 19

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)$1 000 000
• B)$780 000
• 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:

Literacy Tests

Historically used in the United States as a means to disenfranchise racial minorities, particularly African Americans, under the guise of assessing eligibility to vote.

Disfranchised

Disfranchised refers to individuals who have been deprived of the right to vote or other rights of citizenship.

Voting

The act of making a choice among options in an election or referendum, typically through a ballot.

American Economy

The economic system of the United States, characterized by a mixed economy with private freedom combined with centralized economic planning and government regulation.