Question

Mr. Arbit is enthusiastic about this investment idea but Mr. Boring is a little sceptical. This impasse makes them approach a consultant. The consultant makes some observations. Which of the following observations, made by the consultant, might reduce Mr. Arbit’s enthusiasm for the new investment idea?

• A. Investment is warranted only when benefits outweigh costs.
• B. Technology investments give higher earnings in future.
• C. Investment in technology leads to reduction of costs in the long run.
• D. Technology risks can be controlled.
• E. Business is all about taking risky decisions.
• A. All other competitors are aggressively investing in risky technologies.
• B. If the technology succeeds, the annual earnings would grow 3 times from the next financial year and they would be able to recover the invested money within 1 year.
• C. Preliminary studies indicate that success rate of the technology is 85%.
• D. The R&D team of ITS is working to counter any possible downside of the technology.
• J. Business is all about taking risky decisions.
• A. 231,200 million rupees
• B. 331,000 million rupees
• C. 400,510 million rupees
• D. 431,000 million rupees
• O. 464,100 million rupees

Answer 1

The Correct Option is A

- Mr. Arbit is enthusiastic about the investment idea. However, the consultant's observation that investment is only justified when the benefits outweigh the costs might make Mr. Arbit rethink. If the benefits are not clear or substantial enough, this could reduce his enthusiasm for the investment idea. \[ \boxed{A} \]

Answer 2

Decision makers want {uncertainty-reducing} information — numbers about likelihoods or risks.
(A) is about competitors’ behavior; it does not quantify the tech’s risk.
(B) gives upside if it {succeeds} but says nothing about the chance of success.
(C) provides a quantitative probability (85% success rate), directly reducing uncertainty.
(D) is process-oriented (“working to counter”) without measurable risk.
(E) is a platitude and adds no data.
\[ \boxed{\text{Choose the option that quantifies risk: (C) with an 85% success probability.}} \]

Answer 3

During the technology’s active life, the business earns 150,000 million per year (given in the data for this set), while without it the earnings are 50,000 million per year.
Hence, the {incremental} earning each active year is \[ \Delta = 150{,}000-50{,}000=100{,}000\ \text{million}. \] Mr.\ Boring expects the tech to last only \(\mathbf{2}\) years, while Mr.\ Arbit expects \(\mathbf{5}\) years. Therefore, the {difference} between their forgone earnings over 5 years equals the future value (at the end of year 5) of the extra three yearly deposits (years 3, 4, 5), each of size \(\Delta\), compounded at \(10%\): \[ \text{Difference} = \Delta\Big[(1.10)^{2}+(1.10)^{1}+(1.10)^{0}\Big] = 100{,}000\,(1.21+1.10+1). \] \[ =100{,}000\times 3.31 = \boxed{331{,}000\ \text{million rupees}}. \]