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.
A
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