Question

In which step of the seven-step systematic economic analysis technique (SEAT) would multiple criteria be considered rather than a single criterion to make a decision? a) Compare the alternatives. b) Select the preferred investment. c) Perform supplementary analyses. d) Estimate the cash flows.

Answer 1

Answer: b) Select the preferred investment.

Explanation:

The seven-step systematic economic analysis technique (SEAT) are:

• Identifying investment alternatives

• Defining planning horizon

• Specifying discount rates

• Estimating cash flows

• Comparing alternatives

• Performing supplementary analysis

• Selecting preferred investment.

It should be noted that selecting preferred investment is the final stage and at this stage, many factors have to be considered before a final decision is made. To maximize the the present worth, multiple criteria are taken into consideration rather than a single criteria.

Therefore, select the preferred investment is the correct answer.