Time-Adjusted Rate of Return: Ethics. In preparing capital budgeting analysis to purchase new equipment for his department, Jim Atkins calculates that the time-adjusted rate of return will be 18 percent, well above the company's cost of capital of 10 percent. He believes the figures he used and the assumptions he made to arrive at 18 percent are quite reasonable. However, in preparing his final analysis for submission to his boss, Jim adjusts the cash flow projections to show a rate of return of only 12 percent. Jim reasons. "This way when my department achieves an actual rate of return of 18 percent, I'll look real good to the boss." Why is Jim's behavior unethical? Cite the specific Standards of Ethical Conduct described in Exhibit 1-2 (Chapter 1) that relate to his conduct.

b. What could management do to control actions of this type?