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:

Ethical Intensity

The degree of importance or impact that an ethical issue has, based on its potential outcomes and the number of people affected.

Social Security Benefits

Government provided financial benefits given to individuals due to retirement, disability, or death, for the purpose of income support.

Procedural Justice

The fairness of the processes that resolve disputes and allocate resources.

Interactional Justice

The perception of fairness in interpersonal interactions within organizations, focusing on respect and dignity.