A Convenience Store Owner Is Contemplating Putting a Large Neon

question 2

Multiple Choice

A convenience store owner is contemplating putting a large neon sign over his store. It would cost $50,000, but is expected to bring an additional $24,000 of profit to the store every year for five years. Would this project be worthwhile if evaluated using a payback period of two years or less and if the cost of capital is 10%?

• A) Yes, since it will pay back its initial investment in two years.
• B) Yes, since the value of the cash flows into the store, in present dollars, are greater than the initial investment.
• C) Yes, since the cash flows after two years are greater than the initial investment.
• D) No, since the value of the cash flows over the first two years are less than the initial investment.

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Definitions:

High-involvement Organization

An organizational model that encourages employee participation in decision-making and business operations to improve performance and satisfaction.

Cultural Value

Beliefs or ideals shared by members of a society about what is important, desirable, and how people should behave.

Classical Management Strategy

A set of principles for managing organizations that emphasizes planning, organizing, leading, and controlling.

Horizontal Communication

The exchange of information between individuals or units of an organization at the same hierarchical level, aimed at coordination and collaboration.