Calculate the NPV for the replacement decision if the selling price per unit decreases by 0.76%
A)£11,000.
B)£0.
C)£200.
D)£100.

Question

Quizplus · Accepted Answer

If the selling price per unit decreases, the revenue will decrease as well, which will decrease the net present value. Therefore, the NPV will become lower than the current NPV of £0. Any positive value for the NPV is an improvement over no project at all, which means that the new NPV will be negative if the project is pursued. In this scenario, the best choice is not to replace the equipment, which means the answer is B.

Calculate the NPV for the Replacement Decision If the Selling