Question

You run a small bagel shop and are considering replacing your four employees with automated machines that allow customers to buy their bagels without any human interaction. Of the following, the most difficult task you face in computing the NPV of this change is the: Select one:

a. Estimation of the reduction in wages you will have from the decrease in work force.
b. Estimation of the reduction in taxes you will get from the increase in depreciation.
c. Estimation of the cost of purchasing the new equipment.
d. Estimation of the cost of installing the new equipment.
e. Estimation of the total change in sales that will result from the change.

Answer 1

The most difficult task in computing the NPV of replacing employees with automated machines in a bagel shop is the estimation of the total change in sales that will result from the change due to uncertainties and external factors.

Step-by-step explanation:

The most difficult task in computing the NPV of replacing employees with automated machines in a bagel shop is the estimation of the total change in sales that will result from the change.

This is because predicting the impact on sales is subject to various uncertainties and external factors that may influence customer behavior.