Grantran Metrics is considering new equipment to run their service function for
ID: 2713041 • Letter: G
Question
Grantran Metrics is considering new equipment to run their service function for their customers. This equipment would run faster and less expensively than equipment currently in place. This would be best characterized as:
Independent investment
Replacement problem
Contingent investment
Expansion investment
1 points
QUESTION 7
A company is evaluating two competing investments. Investment X has a cost of $100,000 and a NPV estimated at $35,000. Investment Y has a cost of $220,000 and a NPV estimated at $35,500. Taking everything into account, you would recommend the company undertake which investment and why?
Neither investment is acceptable.
Not sure. Need additional information.
Take investment X, since it has almost the same value creating potential, but costs a fraction of Y. Do something else with the $120,000 saved up front.
Undertake investment Y as it produces more shareholder value.
a.Independent investment
b.Replacement problem
c.Contingent investment
d.Expansion investment
Explanation / Answer
Replacement problem
Here we are going to replace the existing equipment in order to increase the production or to reduce the cost. This type of decisions is known as replacement decision.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.