Ron Jasper manages a factory for Frombees Inc. A salesperson for new factory equipment has persuaded Ron

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Ron Jasper manages a factory for Frombees Inc. A salesperson for new factory equipment has persuaded Ron that the new equipment offered by her company would be less dangerous for the employees and lower the sound level in the factory significantly. Ron believes that employees would be more satisfied with their jobs as a result of reduced danger and lower sound levels. Ron has always said that satisfied employees are more productive. Thus, in making the cash flow estimates for the new equipment, Ron has included increased cash flows from increased productivity. In fact, these estimated increases in productivity are just enough to allow the net present value of the proposal to be positive. Name at least two reasons why the net present value estimates could be optimistic.
Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at...
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Financial and Managerial Accounting the basis for business decisions

ISBN: 978-0078111044

16th edition

Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello

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