Question
A firm is considering an investment. Three estimates for the various parameters are as follows: OPTIMISTIC VALUE: cost: $1000 net annual benefit: $200 useful life:
A firm is considering an investment. Three estimates for the various parameters are as follows:
OPTIMISTIC VALUE:
cost: $1000
net annual benefit: $200
useful life: 12 years
salvage value: $100
MOST LIKELY VALUE:
cost $1000
net annual benefit: $198
useful life: 12 years
salvage value: $0
PESSIMISTIC VALUE:
cost: $1052
net annual benefit: $190
useful life: 12 years
salvage value: $0
If a 10% before-tax minimum attractive rate of return is required, is the investment justified under all three estimates? What is an expected value and variance of rate of return?
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Auditing ISO Management System
Authors: Dr. RAMESH R LAKHE, Dr. RAKESH L. SHRIVASTAVA, M M NAVEED, KRANTI P DHARKAR, Dr. C M SEDANI
1st Edition
1702203913, 978-1702203913
