Major Importers Would Like to Spend $211,000 to Expand Its

question 60

Multiple Choice

Major Importers would like to spend $211,000 to expand its warehouse. However, the company has a loan outstanding that must be repaid in 2.5 years and thus will need the $211,000 at that time. The warehouse expansion project is expected to increase the cash inflows by $48,000 in the first year, $139,000 in the second year, and $210,000 a year for the following two years. Should the firm expand at this time? Why or why not?

• A) Yes; because the money will be recovered in 1.69 years
• B) Yes; because the money will be recovered in 1.87 years
• C) Yes; because the money will be recovered in 2.11 years
• D) No; because the project never pays back
• E) No; because the money will not be recovered in time to repay the loan

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Definitions:

Quality of Life

The standard of health, comfort, and happiness experienced by an individual or group.

Human Being

A member of the species Homo sapiens; an individual characterized by the capacity for empathy, reasoning, and problem-solving.

Primary Goal

The main or most important objective that an individual or organization aims to achieve.

Survival

The act of continuing to live or exist, typically in spite of an ordeal or difficult circumstances.