One of Your Managers Has Requested the Purchase of a New

question 16

Essay

One of your managers has requested the purchase of a new capital asset and as part of your analysis you are calculating the present value of the project’s cash flow. Your manager has argued that your analysis is flawed. You believe the manager is trying to manipulate the analysis. You have determined the amount and timing of the project’s cash flow.

Required:

a. Discuss how a manager can increase the project’s present value without substantially altering it.

b. How can a company prevent managers from using such a method to their benefit?

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Definitions:

Scheduling

The process of organizing, planning, and allocating resources or activities over time.

Length Of Time

The duration or period between two events, often measured in terms of seconds, minutes, hours, days, or years.

Neutral PH

A condition where a solution demonstrates a pH of 7, indicating neither acidity nor alkalinity.

Corrosion

The process by which metals deteriorate due to reactions with chemicals in their environment.