Trey Leeman,Operations Manager at National Consumers,Inc

question 2

Multiple Choice

Trey Leeman,Operations Manager at National Consumers,Inc.(NCI) ,is evaluating alternatives for increasing capacity at NCI's Fountain Hill plant.He has identified four alternatives,and has constructed the following payoff table which shows payoffs (in $1,000,000's) for the three possible levels of market demand: The opportunity loss for the combination "Purchase New Equipment" and "Low" is ___.

• A)0.5
• B)1.5
• C)2.5
• D)3.0
• E)3.5

---

Definitions:

NPV

NPV, or Net Present Value, is a financial metric used to evaluate the profitability of an investment, calculated by subtracting the present value of cash outflows from the present value of cash inflows over a period of time.

Cost of Capital

The rate of return a company must earn on its investment projects to maintain its market value and attract funds.

Investment

The act of allocating resources, usually money, with the expectation of generating an income or profit.

Mutually Exclusive Projects

Investment opportunities where the acceptance of one project requires the rejection of another.