General Manufacturing Company Consists of Several Divisions,one of Which Is

question 22

Essay

General Manufacturing Company consists of several divisions,one of which is the Transportation Division.The company has decided to dispose of this division since it no longer fits the company's long-term strategy.An offer of $9,000,000 has been received from a prospective buyer.If General retained the division,the company would operate the division for only nine years,after which the division would no longer be needed and would be sold for $600,000.If the company retains the division,an immediate investment of $500,000 would need to be made to update equipment to current standards.Annual net operating cash flows would be $1,805,000 if the division is retained.The company's discount rate is 12%.
Required:
Using the net present value method,determine whether General Manufacturing should accept or reject the offer made by the potential buyer.

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Definitions:

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The deliberate release of viruses, bacteria, or other germs to cause illness or death in people, animals, or plants, with the intention of causing fear, harm, or political gain.

Anthrax

A serious infectious disease caused by Bacillus anthracis bacteria, characterized by skin, lung, and intestinal infections, potentially fatal if untreated.

Community Health

A branch of public health that focuses on promoting, protecting, and improving the health of individuals in a community.