Consider a New Firm That Is Working on the First

question 110

Multiple Choice

Consider a new firm that is working on the first generation of long-awaited consumer jet packs. The project will take a tremendous amount of R&D expenditure. Even if the development is successful, manufacturing the first generation of jet packs is likely to be so expensive that only a selected few consumers will be able to afford them. The projected sales of the first generation of jet packs almost certainly won't cover the development and manufacturing costs-the project has a negative NPV. Which of these reasons would validate the firm's decision to pursue the jet pack project?

• A) If development is unsuccessful, it can abandon the project before spending money on manufacturing.
• B) If the project is successful, it may lead to a very profitable second project-a cheaper jet pack that will be a positive-NPV project.
• C) Because it is a high-tech firm, the cash flows generated by a project are not important to valuing the company.
• D) If development is successful, it allows managers to reach wide range of consumers.

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Definitions:

Salesperson of the Year Award

An accolade awarded within an organization to acknowledge the most outstanding salesperson based on performance, achievements, or sales figures.

Organizational Culture Artifact

Tangible or visibly recognizable elements within an organization that reflect its culture, such as its language, rituals, symbols, stories, and physical arrangements.

Ceremony

A formal event conducted on important occasions, often involving ritualistic procedures or celebrations.

Ritual

A series of actions or type of behavior regularly and invariably followed by individuals, often with symbolic meaning.