Suppose a Manager Is Deciding Whether or Not to Purchase

question 64

Multiple Choice

Suppose a manager is deciding whether or not to purchase a piece of equipment to make an input internally and has completed the majority of the net present value (NPV) calculations. The manager has correctly calculated the NPV to be equal to: NPV = ($1.082 × Q) - $200,000, where Q is the annual quantity of the input the firm needs. If the firm needs 175,000 units of the input each year, the manager_______ buy the equipment because the NPV is ________ .

• A)should not; negative
• B)should; negative
• C)should; positive
• D)should not; positive

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Definitions:

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The set of rules or customs governing behavior in particular situations, often ensuring respectful and considerate interaction.

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