Blossoms Inc

question 87

Multiple Choice

Blossoms Inc., a local florist, is considering replacing its current refrigerator used for storing flowers with a larger one. The estimated cost of the new refrigerator will be $30,000. Using a discount rate of 15%, the company calculates a net present value for the new refrigerator of $6,000. Based on this information, which of the following statements is true?

• A) If the actual cost of the new refrigerator ends up being greater than $36,000, the net present value will become negative.
• B) If the actual cost of the new refrigerator ends up being less than $36,000, the net present value will become negative.
• C) If the actual cost of the new refrigerator ends up being $30,000, the actual rate of return is equal to 15%.
• D) If the actual cost of the new refrigerator ends up being less than $30,000, the company should not make the investment.

---

Definitions:

Consistent

A statistical property indicating that as the size of the sample increases, the estimator converges in probability to the parameter being estimated.

Unbiased Estimators

Statistical estimators that, on average, accurately predict the value of a population parameter without systematic error.

Smallest Variance

The smallest degree of spread or dispersion of observations around the mean in a dataset, indicating less variability.

Relatively Efficient

Refers to a process or system that achieves its goals with comparatively minimal waste of time, resources, or energy.