A Manager Is Considering Investing in a New Machine That

question 13

Multiple Choice

A manager is considering investing in a new machine that costs $2.5 million.He identifies four uncertain variables: sales,fixed costs,advertising costs and the life of the new machine.The required rate of return is 15% p.a.Given the following information,determine which variable is most sensitive to changes or errors:

• A)Sales.
• B)Fixed costs.
• C)Advertising costs.
• D)Life of machine.

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Definitions:

Salient Attributes

Key features or characteristics of a product or service that are most important to the consumer and influence their purchasing decision.

Symbols

Objects, characters, figures, or colors used to represent abstract concepts, ideas, or phenomena.

Segmentation Process

The practice of dividing a market into distinct groups of buyers with different needs, characteristics, or behavior, who might require separate products or marketing strategies.

Segmenting Markets

The practice of dividing a broad target market into subsets of consumers with common needs or characteristics and then designing and implementing strategies to target them.