A New Computer System Is Expected to Cost $40 Million

question 30

Multiple Choice

A new computer system is expected to cost $40 million and generate annual savings of $12 million over the next five years. Should the bank invest in this project if the discount rate is 18 percent?

• A)Yes, because the net present value of the project is $2,473,948.
• B)No, because the net present value of the project is -$2,473,948.
• C)Yes, because the net present value of the project is $24.8 million.
• D)No, because the net present value of the project is -$24.8 million.
• E)Yes, because the net present value of the project is $1,342,688.

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Definitions:

Heuristics

Mental shortcuts or rules of thumb that simplify decision making and problem-solving tasks, often sacrificing accuracy for speed.

Information-Processing

A cognitive approach that likens the mind to a computer and studies how people encode, store, process, and retrieve information.

Creativity

The ability to generate new, original, or valuable ideas, solutions, or artistic expressions.

Scope

The extent or range of view, reach, or effect. In project management, it typically refers to the detailed set of deliverables or features of a project.