Which of the Following Makes Using Present Value Approaches in Capacity

question 23

Multiple Choice

Which of the following makes using present value approaches in capacity decisions difficult?

• A)The discount rate must be adjusted to account for inflation.
• B)Some cash flows are positive and other cash flows are negative.
• C)The payback period might not be long enough to justify a capacity decision.
• D)Capacity decisions are made amidst much uncertainty, so cash flows cannot be estimated with great accuracy.
• E)None of the above.

---

Definitions:

Energy Information Administration

A U.S. Government agency that provides official energy statistics and analysis.

GDP Per Capita

A measure of a country's economic output that accounts for its number of people, essentially dividing the GDP by the population, to indicate the average economic output per person.

Energy Efficiency

The ratio of useful output of services to the input of energy; it is aimed at reducing energy consumption and environmental impact.

Energy-Use-To-GDP Ratio

A metric that compares a country's total energy consumption to its gross domestic product, indicating the energy efficiency of its economy.