Spruce Bank Is Planning to Automate Some of Its Back

question 1

Multiple Choice

Spruce Bank is planning to automate some of its back office functions and reduce operating costs.The installation of new computers and software will require an initial investment of $1,000,000.The savings generated because of reduced personnel cost is $200,000 per year.The bank uses an 8 percent rate of discount to evaluate cost saving projects which are expected to last 10 years. Should the bank undertake the project given the above information?

• A)Yes, because the NPV of the project is $500,000.
• B)Yes, because the NPV of the project is $342,016.
• C)No, because the NPV of the project is -$500,000.
• D)No, because the NPV of the project is -$201,458.
• E)No, because the IRR of the project is lower than 12 percent.

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Definitions:

Group Harmony

The degree of agreement, peace, and unity within a group, facilitating cooperative and smooth interactions.

Social Exchange Theory

A conceptual framework suggesting that social behavior is the result of an exchange process aiming to maximize benefits and minimize costs.

Norm Of Reciprocity

A social expectation that people will respond to each other in kind, returning benefits for benefits and responding with either indifference or hostility to harms.

Transformational Leaders

Leaders who inspire and motivate their followers by presenting a compelling vision of the future, fostering an environment of intellectual stimulation, and demonstrating personal attention to each member's needs and development.