Software Hub Is Deciding Whether to Purchase New Accounting Software

question 54

Multiple Choice

Software Hub is deciding whether to purchase new accounting software.The cost of the software package is $55,000,and its expected life is 10 years.The payback for this investment is four years.Assuming equal yearly cash flows,what are the expected annual net cash savings from the new software? (Assume the investment has no salvage value.)

• A)$5,500
• B)$37,800
• C)$13,750
• D)$220,000

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Definitions:

Parameter

A numeric characteristic that describes and summarizes an entire population of data.

Statistic

A characteristic or measure obtained from a sample of data, used to estimate the value of a population parameter.

Variance

A measure of how spread out a set of data is, calculated as the average of the squared differences from the Mean.

Variance

A statistical measure that tells us how dispersed or spread out the values in a dataset are around the mean.