Jason Kemp had conflicting emotions. On the one hand, things were going so well. He had just completed six months as the assistant financial manager in the electronics division of Med$-$Products Inc. The pay was good, he enjoyed his co$-$workers, and he felt that he was part of a team that was making a difference in Canadian health care. On the other hand, his latest assignment was causing him some sleepless nights.

Mel Cravens, his boss, had asked him to "refine" the figures on the division's latest project $-$ a portable imaging device code$-$named ZM$.$ The original estimates called for investment of $$15\mathrm{.}6$ million and projected annual income of $$1\mathrm{.}87$ million. MedProducts required an ROI of at least $15\%$ for new project approval; so far ZM$\text{'}$s rate of return was nowhere near that hurdle rate. Mel encouraged him to show increased sales $($and corresponding expenses$)$ in order to get the projected income above $$2\mathrm{.}34$ million. Jason asked for a meeting with Mel to voice his concerns.

Jason: Mel, l've gone over the figures for the new project and can't find any way to get the income above $$1\mathrm{.}9$ million. The salespeople have given me the most likely revenue figures, and production feels that the expense figures are solid.

Mel: Jason, those figures are just projections. Sales doesn't really know what the revenue will be$.$ In fact, when I talked to Sue Harris, our sales vicepresident, she said that the sales could range from $$3$ million to $$4$ million. Use the higher figure. I$\text{'}$m sure this product will justify our confidence in it$!$

Jason: I know the range of sales was that broad, but Sue felt the $$4$ million sales estimate was pretty unlikely. She thought that, during the first $5$ years or so$,$ ZM sales would stay in the lower end of the range.

Mel: Again, Sue doesn't know for sure. She's just estimating. Let's go with the higher estimate. We really need this product to expand our line and to give our division a chance to qualify for sales$-$based bonuses. If ZM sell at all, our revenue will go up$,$ and we'll all share in the bonus pool!

Jason: I don't know, Mel. I feel pretty bad signing off on ROI projections that I have so little confidence in$.$

Mel: $($frustrated$)$ Look, Jason, just prepare the report. I'll back you up$.$

Required:

a$.$ What is the ROI of project $ZM$ based on the initial estimates? What would ROI be if the income rose to $$2\mathrm{.}34$ million?

b$.$ Do you agree that Jason has an ethical dilemma? Explain. Is there any way that Mel could ethically justify raising the sales estimates and$/$or lowering expense estimates?

c$.$ What do you think Jason should do$?$ Explain.