Use the Information Below to Answer the Following Question(s)

question 34

Multiple Choice

Use the information below to answer the following question(s) .Jupiter Ltd.wants to automate one of its production processes.The new equipment will cost $90,000.In addition, Jupiter will incur installation and testing costs of $5,000 and $4,500 respectively.The expected life of the equipment is 5 years and the salvage value of the equipment is estimated at $12,000.The annual cash savings are estimated at $29,000.The company uses straight-line depreciation and has a required rate of return of 9%.Ignore income taxes.
-Which of the following is TRUE concerning capital budgeting analysis?

• A)The IRR and AARR consider the time value of money.
• B)The payback method and the AARR both consider profitability.
• C)NPV and IRR consider accruals.
• D)The payback method and the AARR both consider profitability, and NPV and IRR do not consider accruals.
• E)NPV and IRR do not consider accruals, and the IRR considers the time value, but AARR does not.

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Definitions:

Variables

Elements, characteristics, or conditions that can change or vary in a study or experiment, affecting the results in some way.

Rain

Precipitation in the form of water droplets that fall from clouds in the Earth's atmosphere.

Least Squares Regression

A method that determines the best-fitting line or curve by minimizing the sum of squares of the residuals.

Scatter Diagram

A graphical depiction used to visualize the relationship between two numerical variables, showing their pattern of correlation.