Lott Bros Developers Evaluates a Great Many Small to Medium

question 23

Multiple Choice

Lott Bros Developers evaluates a great many small to medium size projects each year. Some are riskier than others. Lott Bros should probably

• A) allow individual project managers to estimate their own discount rates.
• B) try to identify the specific funding sources for each project.
• C) use the company's overall WACC for all projects.
• D) spend a great deal of time and money to estimate discount rates for each project.

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Definitions:

Departmental Accounting System

This system allows for accounting and financial reporting to be done separately by departments within an organization, facilitating more specific financial oversight.

Cost Center

A department or function within an organization where its costs are accumulated, but it does not directly generate revenue.

Profit Center

A business unit or department within an organization that is treated as a separate entity for the purpose of calculating its profitability.

Transfer Prices

Prices charged for the sale of goods or services between divisions or subsidiaries within the same company.