A Manager Is Considering Whether to Purchase a New Company

Multiple Choice

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.