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Basic Question 2 of 29
Jack runs a small bagel shop and is considering replacing his four employees with automated machines that allow customers to buy their bagels without any human interaction. Of the following, the most difficult task Jack faces in computing the NPV of this change is estimation of the ______
B. cost of purchasing the new equipment.
C. reduction in wages he will have from the decrease in work force.
D. reduction in taxes he will get from the increase in depreciation.
E. cost of installing the new equipment.
A. total change in sales that will result from the change.
B. cost of purchasing the new equipment.
C. reduction in wages he will have from the decrease in work force.
D. reduction in taxes he will get from the increase in depreciation.
E. cost of installing the new equipment.
User Contributed Comments 16
| User | Comment |
|---|---|
| zwer | hmm... |
| kalps | Well the rest of them are all predictable through estimates - sales is the only one that is an unknown variable |
| mikaelian | he can't estimate the amount of sales that he'll lose as customers will go to Einstein Bagel to deal with humans not machines |
| AyshaAli | will production = sales, cant detect this information so it sales which is hard to detect |
| wink44 | Anyone ever seen one of these bagelmaker4000's? |
| pierreE14 | Bagels ?? !! :( I miss France sometimes... |
| chris12345 | i like bagels. i sometimes have them with ham and cream cheese, it is a very tasty snack |
| mattg | seriously, just have a donut |
| erinelize | chris - Yes! Best snack ever! |
| dipu617 | I never saw any Bagel in France!!! |
| Kobe8kenji | never eaten one before :( |
| moneyguy | Nothing like a Breakfast Bagel Sandwich!! |
| Shaan23 | Idiots. Screwed up my studying. Now i'm having a hankering for bagels and a nap |
| ldfrench | Geez, Shaan23. Someone needs to take a "CHILL" pill. Am I right, guys? |
| cfastudypl | Yes, you are right Idfrench, some laugh is just necessary to keep the study lively. |
| kseeba17 | I don't care said Piere, I'm from France. Honorary CFA level 1 for whoever knows the reference. |
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Learning Outcome Statements
describe the capital allocation process, calculate net present value (NPV), internal rate of return (IRR), and return on invested capital (ROIC), and contrast their use in capital allocation
CFA® 2024 Level I Curriculum, Volume 2, Module 5.