One of Your Managers Has Requested the Purchase of a New

question 119

Essay

One of your managers has requested the purchase of a new capital asset and as part of your analysis you are calculating the present value of the project's cash flow.Your manager has argued that your analysis is flawed.You believe the manager is trying to manipulate the analysis.You have determined the amount and timing of the project's cash flows.
Required:
a.Discuss how a manager can increase the project's present value without substantially altering it.
b.How can a company prevent managers from using such a method to their benefit?

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Definitions:

Acceptance

The act of consenting to receive or undertake something offered, or the process of being received as adequate or suitable.

Rejection

The act of dismissing or refusing acceptance, acknowledgment, or approval, which can occur in interpersonal relationships, workplace settings, or social interactions.

Contrast Effect

A cognitive bias where the value or quality of an object is perceived differently when compared alongside other objects, significantly altering perception and judgement.

Balance Theory

A psychological theory suggesting that individuals strive for consistency and balance in their relationships and beliefs for psychological comfort.