T-Bone Company Is Contemplating Investing in a New Piece of Manufacturing

question 124

Multiple Choice

T-Bone Company is contemplating investing in a new piece of manufacturing machinery. The amount to be invested is $150,000. The present value of the future cash flows is $141,000. Should the company invest in this project?

• A) yes, because net present value is +$9,000
• B) yes, because net present value is -$9,000
• C) no, because net present value is +$9,000
• D) no, because net present value is -$9,000

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Definitions:

Clog Dancing

A traditional type of folk dance where dancers wear shoes with wooden soles to produce percussive sounds.

Free-Rider Problem

The free-rider problem occurs when individuals consume a good without paying for it or underpay, benefiting from others' contribution, typically seen in the provision of public goods.

Air Pollution

The presence of harmful or excessive quantities of substances including gases, particulates, and biological molecules in the Earth's atmosphere, causing diseases and environmental damage.

Collective Action Problem

A situation where individuals in a group have incentives not to participate in an action that would benefit all members of the group.