Paradise Resorts, a Hong Kong company that owns and operates holiday resorts, has hired you to analyse
Question:
Paradise Resorts, a Hong Kong company that owns and operates holiday resorts, has hired you to analyse its investment opportunities in Australia. The entity’s managers have always used the payback method and have asked you to prepare an analysis comparing three different resorts: one on the Gold Coast, another on the Sunshine Coast and a third holiday resort in the Northern Territory.
Required
(a) List four methods that could be used to analyse this long-term decision. Describe each method in your own words.
(b) In your own words, describe the advantages and disadvantages of each method you identified in part (a).
(c) Explain why it is not possible to perfectly predict a project’s cash flows.
(d) In using quantitative results for decision making, would you place equal reliance on the results of all four analysis techniques? Explain.
(e) Discuss how the managers of the Hong Kong company might respond to your advice if you recommend an analysis method other than the payback method.
(f) Write a brief memo to the CEO of the company recommending your choice of analysis method, and explaining the most important issues for the CEO to consider when choosing an analysis method.
Step by Step Answer:
Management Accounting
ISBN: 9780730369387
4th Edition
Authors: Leslie G. Eldenburg, Albie Brooks, Judy Oliver, Gillian Vesty, Rodney Dormer, Vijaya Murthy, Nick Pawsey