Your Company Must Ensure the Safety of Its Work Force

question 86

Multiple Choice

Your company must ensure the safety of its work force.Two plans are being considered for the next 10 years: (1) Install a high electrified fence around the property at a cost of R100,000.Maintenance and electricity would then cost R5,000 per year over the 10-year life of the fence.(2) Hire security guards at a cost of R25,000 paid at the end of each year.Because the company plans to build new headquarters with a "state of the art" security system in 10 years, the plan will only be in effect until that time.Your company's required rate of return is 15 percent for average projects, and that rate is normally adjusted up or down by 2 percentage points for high- and low-risk projects.Plan 1 is considered to be of low risk because its costs can be predicted quite accurately.Plan B, on the other hand, is a high-risk project because of the difficulty of predicting wage rates.What is the proper PV of costs for the better project?

• A) -R104,266.20
• B) -R116,465.09
• C) -R123,293.02
• D) -R127,131.22
• E) -R135,656.09

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Definitions:

Cash Collections

The process of gathering all cash receipts and payments, including from sales, financing, or investment activities.

Credit Customers

Customers who purchase goods or services on credit, with an agreement to pay at a later date.

Cash Disbursements

The outflow of cash for the purpose of payment, often documented for accounting purposes.

Direct Materials

Raw materials that are directly used in the manufacturing of a product and can be easily traced to the product.