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

question 45

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%,then the alternative which the owner should choose is:

• A)#1.
• B)#2.
• C)#3.
• D)either #1 or #2.
• E)either #1 or #3.

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Definitions:

Anchoring and Adjustment Heuristic

A cognitive bias where individuals rely too heavily on an initial piece of information (the "anchor") when making decisions, adjusting insufficiently from this starting point.

Ethical Criteria

Standards or principles used to determine the rightness or wrongness of an action, often based on moral considerations.

Constituents

Individuals or groups who have a stake in or are affected by an organization's actions, decisions, and policies.

Canons of Justice

Principles or standards that guide fairness and equity in economic distribution, legal practices, and public policy.