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3) Capital Budgeting - Effects of Events (20 pts) You are analysing a number of capital budgeting decisions design to reduce labor costs or increase
3) | Capital Budgeting - Effects of Events (20 pts) | |||||||
You are analysing a number of capital budgeting decisions design to reduce labor costs or | ||||||||
increase output of your products. How will each of the following events affect the evaluation? | ||||||||
That is, will it make more attractive, less attractive or have no effect? Consider each event | ||||||||
independently. Justify your answer. | ||||||||
a) | Your company signs a new contract, with its union calling for a significant increase in | |||||||
b) | salary rates? | |||||||
c) | Your chief competitor announces that, it will decrease the selling price of its products. | |||||||
The entry of new product will slow the sales-growth rate of one of your major products. |
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