Greenwich Plc Is Considering Adding Two New Products at a Subsidiary

question 59

Multiple Choice

Greenwich plc is considering adding two new products at a subsidiary to improve its overall competitiveness. The new products are enthusiastically supported by the managers responsible and an immediate decision is required. It is normal for the managers to calculate the net present value (NPV) for the projects before it is accepted or rejected.
Details of the proposals

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Calculate the relevant annual cash flow for Project A

• A)£190,000.
• B)£243,000.
• C)£137,000.
• D)£84,000.

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Definitions:

Equity Method

An accounting technique used by a company to record its investment in another company, where the investment represents a significant influence over the investee.

Consolidated Net Income

The total net income of a parent company and its subsidiaries after elimination of inter-company transactions and accounts.

Net Income

The amount of earnings left over after all expenses and taxes have been subtracted from total revenue.

Dividends

Payments made by a corporation to its shareholders, out of its profit or reserves, usually on a regular basis.