A manager is considering whether to purchase a new company vehicle that costs $50 000.She identifies two uncertain variables: net cash flows and the life of the vehicle.Assuming that the required rate of return is 10% p.a. ,evaluate which of the two variables is less sensitive to changes or errors using the following information:
A)Net cash flows.
B)Life of vehicle.
C)Both are equally sensitive.
D)Not enough information.

Question

A manager is considering whether to purchase a new company vehicle that costs $50 000.She identifies two uncertain variables: net cash flows and the life of the vehicle.Assuming that the required rate of return is 10% p.a. ,evaluate which of the two variables is less sensitive to changes or errors using the following information: 
A)Net cash flows. 
B)Life of vehicle. 
C)Both are equally sensitive. 
D)Not enough information.

Quizplus · Accepted Answer

The Answer of A manager is considering whether to purchase a new company vehicle that costs $50 000.She identifies two uncertain variables: net cash flows and the life of the vehicle.Assuming that the required rate of return is 10% p.a. ,evaluate which of the two variables is less sensitive to changes or errors using the following information: 
A)Net cash flows. 
B)Life of vehicle. 
C)Both are equally sensitive. 
D)Not enough information.

A Manager Is Considering Whether to Purchase a New Company