Use the Information for the Question(s) Below

question 21

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. At what dollar value should the NPV profile cross the vertical axis?

• A) $780,000
• B) $1,000,000
• C) Cannot be determined because inadequate information is given.
• D) The vertical axis crossing point cannot be calculated since the cash inflows are in perpetuity.

---

Definitions:

Attitude Change

The process in which an individual's feelings, beliefs, or behavioral intentions toward an object, person, or situation are modified.

Persuasive Message

A message intended to change the attitudes, beliefs, or behaviors of the receiver through argumentation or appeal.

Attention

The act of concentrating on a specific stimulus while ignoring other irrelevant information.

Cognitive Dissonance

A psychological phenomenon where an individual experiences discomfort from holding two or more conflicting beliefs, attitudes, or values.