Reference: 10-04 The Finney Company Is Reviewing the Possibility of Remodelling One

question 19

True/False

Reference: 10-04
The Finney Company is reviewing the possibility of remodelling one of its showrooms and buying some new equipment to improve sales operations. The remodelling would cost $120,000 now and the useful life of the project is 10 years. Additional working capital needed immediately for this project would be $30,000; the working capital would be released for use elsewhere at the end of the 10-year period. The equipment and other materials used in the project would have a salvage value of $10,000 in 10 years. Finney's discount rate is 16%.
-Screening decisions in capital budgeting involve determining whether a project meets some minimal pre-set standard of acceptance.

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Definitions:

Philip Crosby

Philip Crosby was a businessman and author who contributed significantly to management theory, particularly in the areas of quality and performance improvement.

Contingency Plan

A strategy or plan developed to address possible future events or circumstances that might adversely affect an organization.

Early Warning Signals

Indicators or signs that precede and predict upcoming problems or changes, allowing for preemptive action.

Shadow Plan

A backup plan or strategy that is developed to be used as an alternative in case the original plan fails or cannot be implemented.