Final answer:
To justify the cost of a new manufacturing plant, CEO Bernie needs to calculate the net present value (NPV). The NPV compares the present cost of investment to the discounted value of future returns, providing a measure of the project's profitability. A is the correct option.
Step-by-step explanation:
When Bernie, the CEO of a U.S. manufacturer, is considering building a new manufacturing plant and must calculate the return on the project to justify the cost, he is seeking to determine the net present value (NPV).
This calculation involves comparing the present costs of making the investment to the present discounted value of future benefits. The NPV helps in assessing the profitability of a project by taking into account the time value of money, essentially providing a method for evaluating the expected financial gains relative to the initial investment.
The calculation that best describes this process is option a. net present value. This assesses the projected net returns over time, discounted back to their present value. It differs from cost of equity, cost of capital, and cost of debt, which are related to the costs associated with financing a business or an investment.