Open Windows Corp

question 11

Multiple Choice

Open Windows Corp. has the following investment goals: payback (PB) of five years, accounting rate of return (ARR) of 15%, hurdle rate of 20%. Analysis of the Great Bear Oil plant expansion shows the following results: PB is 4.5 years, ARR is 14%, IRR is 21% and NPV is ($12,500) . What should Open Windows do?

• A) Proceed with the expansion because the PB period is less than the goal.
• B) Proceed with the expansion because the ARR is less than the goal.
• C) Wait until the price of oil rises and the calculations improve.
• D) Reject the expansion because the the NPV is less than zero.
• E) Reject the expansion because the IRR is higher than the goal.

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Definitions:

Structural Inertia

A theory explaining an organization's resistance to change, due to its established routines and structures.

Resistance To Change

Refers to the act of opposing or struggling with modifications or transformations that alter the status quo in an organization or personal life.

Same Rules

The principle of "same rules" refers to the application of uniform policies and guidelines to all members of a group, organization, or system, ensuring fairness and consistency in decision-making and behavior.

Increased Efficiency

The improvement in performance or productivity, achieving more output from the same or fewer inputs.