The Decision Rule for an NPV Analysis Is to Accept

question 29

Multiple Choice

The decision rule for an NPV analysis is to accept:

• A) the smallest negative NPV.
• B) the largest negative NPV.
• C) the NPV closest to zero.
• D) the largest positive NPV.

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Definitions:

Safety Inventory

Additional stock that is kept in inventory to protect against uncertainties in demand or supply.

Replenishment Cycles

The process and timing involved in restocking goods or inventory to maintain adequate supply levels.

Cycle Service Level

The probability that a demand during a replenishment cycle will be fully met without stocking out.

Periodic Replenishment

Periodic Replenishment refers to the inventory management practice of ordering or producing goods at regular intervals, regardless of the inventory levels.