(Present Value Tables Are Needed - the Net Present Value of the Kentucky Proposal Is

question 12

Multiple Choice

(Present value tables are needed.) Williams Department Stores is considering two possible expansion plans.One proposal involves opening 5 stores in Indiana at the cost of $1,800,000.Under the other proposal,the company would focus on Kentucky and open 6 stores at a cost of $2,400,000.The following information is available: $$\begin{array} { | l | l | l | } \hline & \text { Indiana proposal } & \text { Kentucky proposal } \\\hline \text { Required investment } & \$ 1,800,000 & \$ 2,400,000 \\\hline \text { Estimated life } & 10 \text { years } & 10 \text { years } \\\hline \text { Estimated residual value } & \$ 50,000 & \$ 80,000 \\\hline \begin{array} { l } \text { Estimated annual cash inflows over } \\\text { the next 10 years }\end{array} & \$ 400,000 & \$ 500,000 \\\hline \text { Required rate of return } & 10 \% & 10\%\\\hline\end{array}$$
- The net present value of the Kentucky proposal is closest to:

• A)$672,500.
• B)$677,300.
• C)$684,600.
• D)$703,380.

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Definitions:

Sampling Distribution

The probability distribution of a given statistic based on a random sample, used to make inferences about the population.

Variance

A measure of the spread of numbers in a data set, indicating how far each number in the set is from the mean.

Board Configurations

The structure and arrangement of a board of directors or trustees, including the number of members, their roles, and how they are chosen.

Sample Sizes

The number of observations or elements selected from a population to conduct statistical analysis.