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:

Explanations Tested

The process of assessing the validity or effectiveness of reasons or justifications through empirical evidence or experimentation.

Behavioral Sciences

The study of human and animal behavior through observation and scientific analysis, including fields like psychology, anthropology, and cognitive science.

Organizational Behavior

The study of how individuals and groups interact within an organization and how this affects the organization’s performance and culture.

Political Science

The study of government systems, political activities, political thoughts, and political behavior.