12 Comparison of Capital Budgeting Techniques The Dilemma at Day-Pro The Day-Pro Chemical Corporation‚ established in 1995‚ has managed to earn a consistently high rate of return on its investments. The secret of its success has been the strategic and timely development‚ manufacturing‚ and marketing of innovative products that have been used in various industries. Currently‚ the management of the company is considering the manufacture of a thermosetting resin as packaging material for electronic
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The Dilemma at Day Pro 1. The payback period can be defined as the length of time it takes before the cumulated stream of forecasted cash flows equal the initial investment (Arnold 2007). By looking at Appendicle A1.0 and A1.1 we can see that the "Epoxy Resin" project has a payback period of 1.5 years while Synthetic Resin has a longer payback period of 2.5 years. On the basis of this methodology we will choose to invest in Epoxy Resin. Though it is important to understand
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1. Calculate the Payback Period of each project. Explain what argument Tim should make to show that the Payback Period is not appropriate in this case. Answer : Year Synthetic Resin Epoxy Resin Cash Flows Cumulative Cash Flows Cash Flows Cumulative Cash Flows 0 -$1‚000‚000 -$1‚000‚000 -$800‚000 -$800‚000 1 $350‚000 -$650‚000 $600‚000 -$200‚000 2 $400‚000 -$250‚000 $400‚000 $200‚000 3 $500‚000 $250‚000 $300‚000 $500‚000 4 $650‚000 $900‚000 $200‚000 $700‚000 5 $700‚000 $1‚600‚000 $200‚000
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1. Payback Period of each project Tim can show that the payback period is not appropriate in the analysis of the projects for the following reasons. First‚ it does not properly account for the time value of money‚ risk financing and other important considerations such as opportunity cost and it does not consider the cost of capital. It does not specify any required comparison to other investments or even to not making an investment. The method is an indication of both the risk and the liquidity
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CASE 01. ETHICAL DILEMMA A CHANGE OF DIRECTION FOR SOUTHERN X LTD John Kolikias‚ managing director of Southern X Ltd‚ fixed his gaze on the numbers on the screen. They were exciting. If correct‚ the innovation would be highly lucrative. The profits of their mobile phone subsidiary would literally explode. John sighed with relief. Southern X had been struggling for the last two years and its share price had plummeted by 40 percent. If the business didn’t turn around soon‚ a major restructuring would
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1.) Synthetic Resin PP=2+250‚000500‚000 =2.5 yrs. Epoxy Resin PP=1+200‚000400‚000 =1.5 yrs. ***Tim must explain to the board that Payback Method does not consider the cost of the capital (debt/equity) that the project will undertake which is reflected in the cash flow. It only states the length of time the company will be tied up in the project. He should also emphasize that the PBP method ignores the time value of money as well as the cash flows occuring after the payback period
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John Porter Dr. Wang MIS 220 Case Study #2: Facebooks Dilemma 1. What concepts in this chapter are illustrated in this case? The concepts that the case study entitled‚ “Facebooks Dilemma” highlights out of chapter 10 of Management information Systems: by Kenneth Laudon & Jane Laudon are based around what is identified as Electronic commerce. Electronic commerce is the use of the internet and the web to perform business transactions more specifically‚ to perform commercial transactions
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Chapter 02 - Investing and Financing Decisions and the Accounting System HANDOUT 2 – 1 SOLUTION‚ continued ANALYZING TRANSACTIONS Analyze each of the following transactions of World Wide Webster by performing each of the following. Then‚ use the chart on the following page to keep track of the amount in each account: (a) Stockholder invests $10‚000 into the business in exchange for 10‚000 shares of $1 par value common stock. 1. Decide if a transaction took place. Yes – received cash and gave stock
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Effect of workplace discrimination on business activities: 3 Causes of workplace discrimination: 5 Cultural discrimination: 5 Gender discrimination: 6 Solutions: 6 Developing code of ethics policy: 6 Affirmative action: 7 Leadership style: 7 Workplace discrimination: Workplace discrimination is one of the major organizational dilemmas that have been affecting organizations business process in one way or other. There have been a lot of evidences that can be observed in different small‚
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A Dilemma and My Solution Based On Utilitarianism Ethical Model (Assignment # 1) Prepared by : Efren A. Course-Section : GNED212-091 Instructor : Mr. Paul B. Class : Friday Afternoons Part 1: Utilitarianism Ethical Model Many people from all walks of life have trouble making decisions in their everyday lives‚ especially on tough or critical situations that may even involve life and death considerations. To address this issue‚ there are four ethical models and four ethical
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