Webster's Wants to Introduce a New Product That Has a Start-Up

question 60

Multiple Choice

Webster's wants to introduce a new product that has a start-up cost of $7,800.The product has a 2-year life and will provide cash flows of $6,700 in Year 1 and $4,300 in Year 2.The required rate of return is 14 percent.Should the product be introduced? Why or why not?

• A)Yes; the NPV is $1,108.15.
• B)Yes; the IRR is 12.97 percent.
• C)Yes; the IRR is 28.72 percent.
• D)Yes; the NPV is $1,409.27.
• E)No; the IRR is 12.94 percent.

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Definitions:

Organic Designs

Flexible, adaptive organizational structures characterized by decentralized decision-making, broad job descriptions, and a network of communications that encourage collaboration.

Narrow Spans Of Control

An organizational structure with a small number of subordinates reporting directly to a manager, allowing for closer supervision.

Adaptive Organizations

Entities that have the ability to adapt and transform in reaction to shifts in market environments, obstacles, and prospects.

Tall Structures

An organizational structure characterized by many levels of hierarchy, with a large number of management levels between the top executives and the lower-level employees.