Where a Manufacturer Has Been Discovered to Have Knowingly Produced

question 24

Multiple Choice

Where a manufacturer has been discovered to have knowingly produced and sold a defective product to the public,which of the following would offer the most favourable remedy for salvaging that company's business reputation?

• A) Deny any wrongdoing and obtain top lawyers to defend against litigation.
• B) Take ownership for the problem and voluntarily compensate affected customers.
• C) Hire bloggers to create confusion of the facts on social networking websites.
• D) Have a top executive issue an official apology presented on national television.

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Definitions:

NPV

Net Present Value (NPV) is a method used in capital budgeting to evaluate the profitability of an investment or project by calculating the difference between the present value of cash inflows and outflows.

Cost of Capital

Cost of capital represents the return rate an entity must pay to its stakeholders in order to justify the use of capital in the business.

Initial Outflow

The initial cash expenditure required to undertake an investment or project.

Average Accounting Return

A measure of investment profitability calculated as the average annual net earnings of a project divided by the average investment in the project.