The Cost of Repositioning an Automobile Gas Tank for Greater

question 78

Multiple Choice

The cost of repositioning an automobile gas tank for greater safety is $11 per vehicle for 12.5 million vehicles. It is expected that 180 deaths will occur if the gas tank location is not redesigned. Failure to redesign the gas tank location therefore implies that the automobile company is implicitly valuing human life at:

• A) exactly $500,000.
• B) more than $736,889.
• C) less than $736,889.
• D) more than $1,000,000.

---

Definitions:

Risk-adjusted Cost of Capital

The rate of return that must be achieved in order to compensate for the risk of an investment, adjusting the cost of capital according to the risk involved.

IRR Estimate

An estimation of the Internal Rate of Return, which is the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.

Asset's Total Assets

The summation of everything of value owned by a person, company, or organization, including both current and non-current assets.

Stand-alone Risk

The risk associated with a single asset or investment, without considering the asset's interaction or diversification effects within a portfolio.