Use the Information Below to Answer the Following Question(s)

question 66

Multiple Choice

Use the information below to answer the following question(s) :
The owner of the Krusty Krab is considering selling his restaurant and retiring.An investor has offered to buy the Krusty Krab for $350,000 whenever the owner is ready for retirement.The owner is considering the following three alternatives:
1.Sell the restaurant now and retire.
2.Hire someone to manage the restaurant for the next year and retire.This will require the owner to spend $50,000 now,but will generate $100,000 in profit next year.In one year the owner will sell the restaurant for $350,000.
3.Scale back the restaurant's hours and ease into retirement over the next year.This will require the owner to spend $40,000 on expenses now,but will generate $75,000 in profit at the end of the year.In one year the owner will sell the restaurant for $350,000.
-If the discount rate is 15%,the alternative with the highest NPV is:

• A)#1 with an NPV of approximately $350,000.
• B)#2 with an NPV of approximately $341,300.
• C)#3 with an NPV of approximately $329,570.
• D)#2 with an NPV of approximately $400,000.
• E)None of the above

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Definitions:

Obedience

A form of social influence where an individual acts in response to a direct order from another individual, usually an authority figure.

Persuasion

The act or process of influencing someone's beliefs, attitudes, or behaviors through argument, reasoning, or appeal.

Groupthink

A behavioral pattern observed in groups where the pursuit of agreement or uniformity leads to choices that are illogical or counterproductive.

Challenger Disaster

The catastrophic failure of the Space Shuttle Challenger shortly after its launch on January 28, 1986, leading to the death of all seven crew members.