Leo Is Considering Adding a Deli to His General Store

question 62

Multiple Choice

Leo is considering adding a deli to his general store.The remodelling expenses and shelving costs are estimated at $27,500.Deli sales are expected to produce net cash inflows of $7,300,$8,600,$9,700,and $9,750 for Years 1 to 4,respectively.Leo has a firm 3-year payback requirement.Should he add the deli?

• A)Yes;because the payback period is 3.19 years
• B)Yes;because the payback period is 2.82 years
• C)No;because the project never pays back
• D)No;because the payback period is 2.82 years
• E)No;because the payback period is 3.19 years

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Definitions:

Innovation

The creation, development, and implementation of new ideas, processes, products, or services that add value or solve problems.

Intrapreneur

An employee within an organization who is given the freedom and financial support to create new products, services, systems, or business models as if they were an entrepreneur.

Scarce Resources

Assets, materials, or commodities that are limited in availability and are considered valuable due to their rarity.

Economics

the social science that studies how goods and services are produced, distributed, and consumed.