Suppose a Manager Is Deciding Whether or Not to Purchase

question 14

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 = ($1.19 × Q) - $1,000,000, where Q is the annual quantity of the input the firm needs. In order for the NPV to be positive, the firm needs at least _______units of the input each year.

• A)369,566
• B)952,260
• C)890,562
• D)840,337

---

Definitions:

Calculate

Determine mathematically.

Percent Change

The extent to which a quantity has increased or decreased, expressed as a percentage.

Initial Value

The starting monetary or numerical value of an investment, account, or another financial instrument before any earnings or losses.

Reduction

The act of making something lesser in size, amount, or degree.