The Owners of a Chain of Fast-Food Restaurants Spend $25

question 70

Multiple Choice

The owners of a chain of fast-food restaurants spend $25 million installing donut makers in all their restaurants. This is expected to increase cash flows by $11 million per year for the next five years. If the discount rate is 5.3%, were the owners correct in making the decision to install donut makers?

• A) No, as it has a net present value (NPV) of -$4.45 million.
• B) No, as it has a net present value (NPV) of -$2.22 million.
• C) Yes, as it has a net present value (NPV) of $13.34 million.
• D) Yes, as it has a net present value (NPV) of $22.23 million.

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Definitions:

Frequency Distribution

A summary of how often different values occur within a dataset, usually presented in a table or graphical format.

Hair Color

An attribute or variable often studied in genetics or sociology, reflecting the pigment of hair on individuals.

Sample

A segment of the broader population selected for analysis, assessment, or interrogation to obtain information that reflects the characteristics of the entire population.

Nominal

Relating to data that can be categorized but not ranked; involves naming or labeling categories.