Bill Watts, president ofWestern Publications, accepts a capital-budgeting project advo¬

cated by Division X. Thus is the division in which the president spent his first 10 years capital BUDGETING AND with the company. On the same day, the president rejects a capital-budgeting project proposal from Division Y. The manager ofDivision Y is incensed. She believes that the Division Y project has an internal rate of return at least 10 percentage points above that of the Division X project. She comments, “What is the point of all our detailed DCF analysis? IfWatts is panting over a project, he can arrange to have the proponents ofthat project massage the numbers so that it looks like a winner.” What advice would you give the manager ofDivision Y?
836 CHAPTER 21 EXERCISES Throughout the assignment material, ignore the effects ofincome taxes.