The Quick-Start Company Has the Following Pattern of Potential Cash $17 \%$

question 68

Multiple Choice

The Quick-Start Company has the following pattern of potential cash flows with its planned investment in a new cold weather starting system for fuel injected cars.


If the company has a discount rate of $17 \%$ , should it decide to invest?

• A)yes, NPV = €2.2 million
• B)yes, NPV = €21.6 million
• C)no, NPV = -€1.9 million
• D)yes, NPV = € 8.6 million
• E)No, since more than one branch is NPV = 0 or negative, the firm must reject.

---

Definitions:

Price-elastic

Describes a situation where the demand for a product is sensitive to price changes.

Home Entertainment System

An array of electronic devices set up in a home to reproduce the experience of watching movies or listening to music in a theater-like setting.

Quaker State Oil

A brand known for producing motor oil and other automotive lubricants and products, with a long history in the United States.

Price-elastic

A product or service is considered price-elastic when its demand significantly changes in response to a change in its price; high elasticity indicates significant changes in demand.