A Convenience Store Owner Is Contemplating Putting a Large Neon

question 2

Multiple Choice

A convenience store owner is contemplating putting a large neon sign over his store. It would cost $50,000, but is expected to bring an additional $24,000 of profit to the store every year for five years. Would this project be worthwhile if evaluated using a payback period of two years or less and if the cost of capital is 10%?

• A) Yes, since it will pay back its initial investment in two years.
• B) Yes, since the value of the cash flows into the store, in present dollars, are greater than the initial investment.
• C) Yes, since the cash flows after two years are greater than the initial investment.
• D) No, since the value of the cash flows over the first two years are less than the initial investment.

Understand the use of radio waves in magnetic resonance imaging (MRI).

Recognize the importance of patient positioning in achieving accurate radiographic images.

Understand the relationship between production functions, cost functions, and returns to scale.

Analyze the profit maximization behavior of competitive firms.

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Definitions:

Interest Rates

The expense associated with acquiring a loan, usually represented as a proportion of the sum lent.

Better Off

A condition in which an individual or group's situation improves in terms of economic welfare, happiness, or other measures of well-being.

Present Value

The current value of a future sum of money or stream of cash flows, given a specified rate of return.

Interest Rate

The percentage of a sum of money charged for its use, often expressed on an annual basis.