Question
A firm is considering a CSR initiative consisting of a series of projects. The project will increase the firms reputation, but the benefits are hard
A firm is considering a CSR initiative consisting of a series of projects. The project will increase the firms reputation, but the benefits are hard to quantify. Your expectation is that each project will return a benefit of $5000, but you can only definitely show that there will be $3000 benefit from each project. The cost of the first two projects is $2000 each, while the cost of the next two projects is $4000 each. Each additional project costs $6000.
a. If the firm decides to only invest in a project to the point that he is certain shareholder value will be increased, then how many projects will be taken on? (1.5 points)
b. What if the firm acts instead on your expected benefits? (1.5 points)
c. Assuming your expected benefits are correct, how much shareholder value is lost if the firm decides to act according only to the definitive benefits? (2 points)
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