Isabella is considering three mutually exclusive options for the additional space she just added to her specialty women's store.The cost of the expansion was $127,000.She can use this additional space to add a fabric and quilting section,add an exclusive gifts department,or expand into imported decorator items for the home.She estimates the present value of these options at $114,000 for fabric and quilting,$163,000 for exclusive gifts,and $138,000 for decorator items.Which option(s),if any,should Isabella accept?

Question

Quizplus · Accepted Answer

Isabella should only accept the option for the exclusive gifts department. This is because the present value of this option is the highest, at $163,000, which is greater than the cost of the expansion at $127,000. The other two options, fabric and quilting and decorator items for the home, have present values lower than the cost of the expansion, meaning that accepting them would result in a net loss. Therefore, option C is the best choice for Isabella.

Isabella Is Considering Three Mutually Exclusive Options for the Additional