EnVo Is Evaluating a Proposal to Move Some Manufacturing Operations

question 70

Multiple Choice

EnVo is evaluating a proposal to move some manufacturing operations from an obsolescent plant in Mexico to a new facility in China.The new facility will cost $58 million to open and is expected to result in savings of $16 million per year for the first five years.At the end of five years, Porter will decide either to close the plant in China or to keep it indefinitely.If EnVo closes the plant, the building and equipment can be sold for $20,000,000.If the plant is kept, assume that the $16 million turns into a perpetuity.There is a 30% chance the plant will be closed and a 70% chance it will be kept.Calculate the expected NPV of the project.Use a discount rate of 12%.

• A)$75.32 million
• B)$30.32 million
• C)$56.04 million
• D)$114.04 million

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Definitions:

Token Economy

A system of behavior modification based on the systematic reinforcement of target behavior through the exchange of tokens that can be exchanged for other reinforcements.

Stimulus Satiation

A decrease in responsiveness to a stimulus after repeated presentations.

Aversive Conditioning

A form of behavioral therapy that involves teaching individuals to associate unwanted behaviors with unpleasant stimuli to reduce or eliminate those behaviors.

Time Out

A behavior modification technique used to eliminate undesirable behavior, especially in children and adolescents, by withdrawing all reinforcers for a period of time.