How Much Could NPV Be Affected by a Worst-Case Scenario

question 67

Multiple Choice

How much could NPV be affected by a worst-case scenario of 25 percent reduction from the $3 million in expected annual cash flows on a five-year project with 10 percent cost of capital?

• A)$2,843,090
• B)$3,750,000
• C)$4,578,825
• D)$6,155,274 $3 million x 25% = $750,000 annual reduction in cash flow
• Change in NPV = $750,000

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Definitions:

Matrix Design

An organizational structure that combines two or more different hierarchies, typically product- and function-based, to facilitate resource sharing and collaboration.

Network Design

The process of planning and structuring a communication network, including the physical and logical layout of network resources, to efficiently meet user needs and business objectives.

Functional Design

A design approach focused on creating products, systems, or services that are primed primarily for efficient and effective functionality rather than aesthetic qualities.

Multidivisional Design

A type of organizational structure that segments operations by product, service, or geographic location, facilitating specialization and managerial focus.