Acorn Corporation Designs and Installs Fire-Suppression Systems in Commercial Buildings

question 20

Essay

Acorn Corporation designs and installs fire-suppression systems in commercial buildings. Over 90 percent of Acorn's business is in new construction, with the remainder in upgrade installations in remodeled buildings. For planning and control purposes, Acorn's controller (Jane Reid) is considering purchasing cost and financial accounting software from Constructor Solutions. Costs for the software modules are shown below: Required:
1. Jane uses value-chain analysis in evaluation of capital investments. She asks you which method, internal rate of return (IRR) or net present value (NPV), would be best in selecting individual software modules, and your reason(s) for the choice of method.
2. Jane says, "If we buy the entire set of six modules, we will get the equivalent of Module 6 free." Why might this savings of almost $1,500 be illusory?
3. The present value of the cost savings generated by the set of six modules, based on a five-year life and discount rate of 18 percent, is estimated as $13,844.50. Should the set be purchased? Explain. How would your decision be affected if Acorn's minimum rate of return were 24 percent? (No calculations are necessary to answer this question.)

Identify the correct hypothesis test to use based on the type of data and the research question.

Understand the concept of statistical power and its importance in hypothesis testing.

Understand the concept of P-value in hypothesis testing and its interpretation.

Formulate null and alternative hypotheses for different types of statistical tests.

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Definitions:

Portfolio Planning

A strategic approach in which investments or projects are selected and managed as a portfolio, considering the balance of risk and reward to achieve overall objectives.

Investments

The act of allocating resources, usually money, with the expectation of generating an income or profit.

SWOT Analysis

A strategic planning tool used to identify and understand an organization’s Strengths, Weaknesses, Opportunities, and Threats.

Substitute Products

Products that serve as alternatives to each other; when the price of one increases, the demand for the alternative typically increases.