Use the Information for the Question(s) Below

question 64

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. If her discount rate is 6%, should she accept the project?

• A) Yes, because the NPV is positive at that rate.
• B) No, because the NPV is negative at that rate.
• C) No, because the NPV is positive at that rate.
• D) Cannot be determined from the information given.

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Definitions:

Fifth Wheel

The lower coupler assembly used on most highway tractors and lead trailers; typically consists of a pivot plate and locking jaws that engage to the kingpin upper coupler on a trailer.

Trailer

A transport vehicle without a motor, designed to be towed by another vehicle.

Tractor

A heavy-duty highway truck designed for towing trailers. Also any of a number of different types of farm and heavy equipment utility vehicles.

Tandem Axle

A pair of axles situated close together in a vehicle to support more weight than a single axle and improve stability.