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 receiving or agreeing to something, such as a contract offer, thereby creating a legally binding agreement.

Intangible Property

Assets that have value but cannot be physically touched, such as intellectual property or trademarks.

Bank Accounts

Financial accounts held by individuals or entities with a financial institution, allowing for the deposit and withdrawal of money.

Insurance Policies

Contracts between an insurer and a policyholder that specify the terms under which the insurer agrees to indemnify the policyholder against financial losses from specific eventualities.