When Making Investment Decisions That Involve Advanced Manufacturing Systems, the Use

question 48

Multiple Choice

When making investment decisions that involve advanced manufacturing systems, the use of net present value:

• A) presents no special problems for the analyst.
• B) often gives rise to net-present-value figures that are negative despite a manager's belief that the investment is beneficial for the firm.
• C) should be coupled with Pareto diagrams.
• D) often omits a number of factors that are difficult to quantify (e.g., greater manufacturing flexibility, improved product quality, and so forth).
• E) often gives rise to net-present-value figures that are negative despite a manager's belief that the investment is beneficial for the firm and often omits a number of factors that are difficult to quantify (e.g., greater manufacturing flexibility, improved product quality, and so forth).

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Definitions:

Framing

The way information is presented so as to emphasize either a potential gain or a potential loss as the outcome.

Representativeness Heuristic

is a cognitive shortcut where the likelihood of an object belonging to a category is assessed based on its similarity to a typical case from that category.

Heuristics

Mental shortcuts or rules of thumb that ease the cognitive load of making a decision, often leading to approximation or educated guesses.

Algorithms

Step-by-step procedures or formulas for solving problems or completing tasks.