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A hairdressing salon can either invest in
1. New. more comfortable chairs at a cost of $5,000
2. New shop windows at a cost of $4,000
Over the next five years. Investment 1 will generate an additional amount of profit whose present value is $6,000. while Investment 2 additional amount of profit whose present value is $5,500
What is the net present value of the best project? Give your answer to the nearest whole dollar.
Suggested Answer: A
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12 comments · newest first
GA
Gail
12 months ago
NPV for the chairs is $1500, definitely the better choice!
VE
Veronica
12 months ago
I think the windows could attract more customers, though.
MA
Makeda
12 months ago
Wait, are we sure about those profit figures?
BE
Bea
1 year ago
Totally agree, $1500 is the way to go!
AR
Arminda
1 year ago
Investment 1 has a higher net present value.
EU
Eun
1 year ago
I feel like I might have mixed up the present values and costs in my head. I hope I can figure out which investment is better!
SA
Salley
1 year ago
If I recall correctly, for Investment 1, the NPV should be $6,000 - $5,000, which gives $1,000. But I’m not sure about Investment 2.
OD
Odette
1 year ago
I think we practiced a similar question where we had to subtract the costs from the present value. I hope I can remember the exact numbers!
DO
Dottie
1 year ago
I remember calculating net present value in class, but I'm not sure if I got the formula right for this one.
TH
Thersa
1 year ago
Configuring a route reflector for the VPN NLRI seems like it could be a valid option too, but I'm not sure if that's the best approach for this specific scenario.
PE
Pearlene
1 year ago
I'm pretty confident this is the accrual basis of accounting. It records revenues and expenses when they're earned/incurred, not when cash changes hands.
KI
King
1 year ago
I think ELB stands for Elastic Load Balancing, but I'm not completely sure. I remember studying it in relation to scaling applications.