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