After Ten Years as a General Auto Mechanic in a Local

question 191

Multiple Choice

After ten years as a general auto mechanic in a local garage, Joe decides he is tired of working for others, especially since business is typically slow and he works partially on commission. So, he
Decides to open his own garage. After estimating the cash flows for his new garage, he finds a
Large, positive NPV. Which of the following is most likely true about his analysis?

• A) The discount rate he used must be too low.
• B) Unless he can find a true source of value in his new venture, he probably made a mistake in estimating his cash flows.
• C) He has likely been overly optimistic about the future and has underestimated future cash flows.
• D) His estimates of initial outlays must be off.
• E) His analysis is probably correct provided there is adequate competition in the auto repair business.

Learn the criteria for making special order decisions, including considerations of capacity and incremental costs.

Grasp the principles of making decisions on unprofitable segments and the broader impacts of such decisions.

Understand the application of incremental analysis across various managerial decisions, such as special orders, equipment replacement, and further processing decisions.

Understand different organizational structures and their characteristics.

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Definitions:

Technological Advance

Innovations and improvements in technology that increase productivity and efficiency in production or services.

Technological Change

The process through which new technologies are developed and introduced, leading to changes in productivity, consumption patterns, and economic structure.

Equilibrium Wages

The payment rate at which the provision of labor matches the request for labor.

Short-Order Cooks

Cooks who specialize in preparing food quickly and efficiently, often in diners and fast-food establishments, responding rapidly to customer orders.