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

question 10

Essay

General Manufacturing Company consists of several divisions,one of which is the Transportation Division.The company has decided to dispose of this division because 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%.(Ignore income taxes in this problem.)
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:

Assault

An act that intentionally places another person in apprehension of imminent harmful or offensive contact.

Contributory Negligence

Contributory negligence is a legal principle where a plaintiff's own negligence partially contributes to the harm they have suffered, potentially reducing or barring their ability to recover damages.

Crosswalk

A designated part of a road at which pedestrians have the right-of-way to cross, often marked with lines.

Statute Violation

An act or omission that contravenes a law formally enacted by a legislative body.