Question
Hector Gaming Company (HGC) is an educational gaming company specialising in young childrens educational games. HGC has just completed their fourth year of operation. The
Hector Gaming Company (HGC) is an educational gaming company specialising in young childrens educational games. HGC has just completed their fourth year of operation. The company is committed to launching 5 new monster trucks versions each April to take advantage of the summer season. HGC invited 2 finance professors to cover capital budgeting, explaining how to calculate the NPV and IRR, and stated that these should be used to screen potential projects and many other innovations that HGC bring into the market each year. Based on their calculation, the launching of 5 new trucks result in the negative NPV and very low IRR leading to the rejection of the project. However, one professor advised the project should be accepted based on its contribution to the organisations objectives and strategic plan. In the Q-and-A session, the ED Wilson, the Hector Gaming Companys CFO and the 2 government officials from the Ministry of Finance office argued in favour of non-financial criteria in selecting and ranking projects and vehemently rejected the NPV and IRR approach. (Fundamental analysis, Palat, 2019, 233)
Give practical recommendations in favour of the CFO and the 2 government officials in soliciting for non-financial criteria when selecting and ranking potential projects.
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