Use the Table for the Question(s)below

question 76

Multiple Choice

Use the table for the question(s) below.
-Visby Rides, a limousine hire company, is considering buying some new luxury cars. After extensive research, they come up with the above estimates of free cash flow from this project. Visby learns that a competitor is thinking of offering similar services, thus reducing Visby's sales. By how much could sales fall before the net present value (NPV) was zero, given that the cost of capital is 10%, and that cost of goods sold is 45% of revenues?

• A)by 24.5%
• B)by 15.5%
• C)by 28.1%
• D)by 10.8%

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Definitions:

Formal Systems

Structured and officially sanctioned procedures, rules, and policies designed to organize and regulate organizational operations and behavior.

Patterns of Activity

Recurring behaviors or actions undertaken by individuals or groups in specific contexts.

Power Bases

The sources of influence and authority an individual or organization possesses.

Self-interested Politics

Actions within an organization where individuals or groups prioritize their own interests over the collective good.