Which of the following is a disadvantage of manufacturer/distributor storage with customer pickup?
A) Customer experience is lower than other options because of the lack of home delivery.
B) Response time is similar to package carrier delivery with manufacturer or distributor storage.
C) Returnability is somewhat easier given that pickup location can handle returns.
D) Product availability is similar to other manufacturer or distributor storage options.
Answer: A
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If the outlay is lower by the amount that Simpson suggests, the project NPV should increase by an amount closest to:
Barbara Simpson is a sell-side analyst with Smith Riccardi Securities. Simpson covers the pharmaceutical industry. One of the companies she follows, Bayonne Pharma, is evaluating a regional distribution center. The financial predictions for the project are as follows: Fixed capital outlay is h1.50 billion. Investment in net working capital is h0.40 billion. Straight-line depreciation is over a six-year period with zero salvage value. Project life is 12 years. Additional annual revenues are h0.10 billion. Annual cash operating expenses are reduced by h0.25 billion. The capital equipment is sold for h0.50 billion in 12 years. Tax rate is 40 percent. Required rate of return is 12 percent. 24 Learning Outcomes, Summary Overview, and Problems part-i-02 13 January 2012; 10:13:23 Simpson is evaluating this investment to see whether it has the potential to affect Bayonne Pharma’s stock price. Simpson estimates the NPV of the project to be h0.41 billion, which should increase the value of the company. Simpson is evaluating the effects of other changes to her capital budgeting assumptions. She wants to know the effect of a switch from straight-line to accelerated depreciation on the company’s operating income and the project’s NPV. She also believes that the initial outlay might be much smaller than initially assumed. Specifically, she thinks the outlay for fixed capital might be h0.24 billion lower, with no change in salvage value. When reviewing her work, Simpson’s supervisor provides the following comments. “I note that you are relying heavily on the NPV approach to valuing the investment decision. I don’t think you should use an IRR because of the multiple IRR problem that is likely to arise with the Bayonne Pharma project. However, the equivalent annual annuity would be a more appropriate measure to use for the project than the NPV. I suggest that you compute an EAA.” A. €O.09 billion. B. €O.14 billion. C. €O.17 billion.
Which of the following is true of Section 10A of the Securities Exchange Act of 1934?
A) It prohibits any manipulative or deceptive practice in connection with the process of the probate. B) It serves as a defense an accountant can assert by claiming due diligence to avoid civil liability. C) It enforces a duty on auditors to detect and report illegal acts committed by their clients. D) It imposes a criminal liability on accountants for making misstatements or omissions in nonaudit services.