Blossoms Inc

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 per cent,the company calculates a net present value for the new refrigerator of $6000.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 per cent.
D) If the actual cost of the new refrigerator ends up being less than $30 000,the company should not make the investment.

Correct Answer:

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