Generro Company Is Considering the Purchase of Equipment That Would

question 85

Multiple Choice

Generro Company is considering the purchase of equipment that would cost $36,000 and offer annual cash inflows of $10,500 over its useful life of 5 years.Assuming a desired rate of return of 12%,is the project acceptable?

• A) No,since the negative net present value indicates the investment will yield a rate of return below the desired rate of return.
• B) Yes,since the investment will generate $52,500 in future cash flows,which is greater than the purchase cost of $36,000.
• C) Yes,since the positive net present value indicates the investment will earn a rate of return greater than 12%.
• D) The answer cannot be determined.

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Definitions:

Fixed Ratio

A schedule of reinforcement where a response is only rewarded after a specified number of responses. It is often used in behavioral psychology.

Variable Interval

A reinforcement schedule where rewards are given after unpredictable time intervals, leading to moderate but steady response rates.

Fixed Interval

In operant conditioning, a schedule of reinforcement where the first response is rewarded only after a specified amount of time has elapsed.

Partial Reinforcement Effect

The typical outcome of a variable ratio of reinforcement in which a slow rate of initial learning is coupled with resistance to extinction.