Which variables did you indicate as your key inputs, decision variables, uncertain variables, and outputs? Why?

Question

What will be an ideal response?

Answer 1

I highlighted the previous year's revenue and costs as well as the cost of the renovation as the key input variables as these known values are critical in making the decision to invest in the expansion or not. I highlighted the investment amount and whether or not to expedite the construction project as the key, and only, decision variables in the model as these are the only variables that the decision maker has control over. I highlighted the APR and estimated growth rates as the key uncertain variables as they are not under the decision maker's control and are crucial in determining whether or not the expansion is worthwhile. I highlighted the previous year's profits, amount needed to finance, and the total additional profits earned in seven years as the key outputs. Of the three identified outputs, the total additional profits earned is considered the primary output as the result of this output is what will determine the outcome of the decision. If the amount is not enough to pay off the amount borrowed then the investment does not meet the requirements of the business owners.