The Management of Nebraska Corporation Is Considering the Purchase of a New

question 7

Multiple Choice

The management of Nebraska Corporation is considering the purchase of a new machine costing $490,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability in this situation: The average rate of return for this investment is:

• A) 18%
• B) 16%
• C) 58%
• D) 10%

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Definitions:

Supply Curve

A graphical representation showing the relationship between the price of a good and the quantity of that good that sellers are willing to supply.

Minimum Price

Is the lowest price at which a product or service can be sold, often set by law or regulation to protect producers or consumers.

Producer

An individual, company, or entity that creates goods or provides services.