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A Manager Is Considering Whether to Purchase a New Company

question 49

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A manager is considering whether to purchase a new company vehicle that costs $50 000.She identifies two uncertain variables: net cash flows and the life of the vehicle.Assuming that the required rate of return is 10% p.a. ,evaluate which of the two variables is less sensitive to changes or errors using the following information: A manager is considering whether to purchase a new company vehicle that costs $50 000.She identifies two uncertain variables: net cash flows and the life of the vehicle.Assuming that the required rate of return is 10% p.a. ,evaluate which of the two variables is less sensitive to changes or errors using the following information:   A) Net cash flows. B) Life of vehicle. C) Both are equally sensitive. D) Not enough information.


Definitions:

Existing Market

A market where products or services are already available and where a business may face competition upon entry.

Product Line

A group of closely related products that are treated as a unit because of similar marketing strategy, production, or end-use considerations.

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