Question: Hannibal Inc., a local butcher, is considering replacing its current refrigerator used for storing meats with a larger one. The estimated cost of the new

Hannibal Inc., a local butcher, is considering replacing its current refrigerator used for storing meats 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 istrue?

A.) If the actual cost of the new refrigerator ends up being less than $30,000, the company should not make the investment

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 greater than $36,000, the net present value will become negative.

D.)If the actual cost of the new refrigerator ends up being $30,000, the actual rate of return is equal to 15%

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!