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Case 2: Payback period & NPV Analysis 15 marks Suva Book shop Management is considering an advertising program that would require an initial expenditure of
Case 2: Payback period & NPV Analysis 15 marks Suva Book shop Management is considering an advertising program that would require an initial expenditure of $165 500 and bring in additional sales over the next five years. The projected additional sales revenue in year 1 is S75 000, with associated expenses of $25 000. The additional sales revenue and expenses from the advertising program are projected to increase by 10 percent each year. (The Book shop is income tax exempt for next 5 years) Required: A) Calculate the payback period for the advertising program. (5 marks) B) Calculate the advertising program's net present value (NPV), assuming a required rate of return of 12 per cent. (10 marks) Case 3: Environmental & Social Responsibility Accounting 10 marks Dutch Group seeks to tie executive bonuses to social responsibility By Richard Milne and Michael Steen DSM wants to focus on 'people, profits, and planet'. Two of Dutch companies have proposed linking top managers' pay to broad measures of environmental sustainability and worker and customer satisfaction, giving a novel twist to the debate on how to reward executive DSM, the Dutch life science group, will announce today that half the bonuses for its management board will be tied to targets such as the reduction of greenhouse gas emissions and energy use, the introduction of new environmentally friendly products and improvements in workplace morale. This week, TNT, the Dutch mail operator, unveiled similar plans that also include customer satisfaction Souroe: Excerpts from Richard Milned Miche Steen Dnch group seeks to tie xecutive bomuses to social responsibility: The Finameial Times Questions: (a) Assume that you are employed in a Manufacturing firm', and your Manufacturing Company is considering following the lead of DSM and is interested in developing some performance indicators to tie executive bonuses to environmental performance. Outline what some of these might be. (5 marks) (b) Explain some measure of performance relating to social issues, such as employee and consumer relations
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