.........................................Seeattachment please answer required questions 1, 2, 3.

Capital Expenditure Decisions Instant Dinners, Inc. (IDI), I san established manufacturer of microwavable frozen foods. Leland Forrest is a member of the planning and analysis staff. Forrest has been asked by Bill Rolland, chief financial officer of IDI, to prepare a net-present-value analysis for a proposed capital equipment expenditure that should improve the profitability of the western plant. This analysis will be given to the board of directors for approval. Several years ago, as director of planning and analysis at IDI, Rolland was instrumental in convincing the board to open the western plant. However, recent competitive pressures have forced all of IDI's manufacturing divisions to consider alternatives to improve their market position. To Rolland's dismay, the western plant may be sold in the near future unless significant improvement in cost control and production efficiency are achieved. Western's production manager, an old friend of Rolland, has submitted a proposal for the acquisition of an automated-material-handling system. Rolland is anxious to have this proposal approved as it will ensure the continuation of the western plant and preserve his friend's position. The plan calls for the replacement of a number of forklift trucks and operators with a computer-controlled conveyor belt system that feeds directly into the refrigeration units. This automation would eliminate the need for a number of material handlers and increase the output capacity of the plant. Rolland has given this proposal to Forrest and instructed him to use the following information to prepare his analysis. Automated-Material-Handling System Projections Projected useful life......................................................................................................... 10 years Purchase and installation of equipment................................................................. $4,500,000 Increased working capital needed* ........................................................................ 1,000,000 Increased annual operating costs (exclusive of depreciation)............................ 200,000 Equipment repairs to maintain production efficiency (end of year 5).............. 800,000 Increase in annual sales revenue ........................................................................... 700,000 Reduction in annual manufacturing costs ............................................................ 500,000 Reduction in annual maintenance costs ............................................................... 300,000 Estimated salvage value of conveyor belt system .............................................. 850,000 *The working capital will be released at the end of the 10-year useful life of the conveyor belt system. The forklift trucks have a net book value of $500,000 with a remaining useful life of five years and no salvage value for depreciation purpose. If the conveyor belt system is purchased now, these trucks will be sold for $100,000. IDI has a 40 percent tax rate, has chosen the straight-line depreciation method for both book and tax purpose, and uses a 12 percent discount rate. For the purpose of analysis, all tax effects and cash flows from the equipment acquisition and disposal are considered to occur at the time of the transaction while those from operations are considered to occur at the end of each year. When Forrest completed his initial analysis, the proposed project appeared quite healthy. However, after investigating equipment similar to that proposed, Forrest discovered that the estimated salvage value of $850,000 was very optimistic. Information previously provided by several vendors estimates this value to be only $100,000. Forrest also discovered that industry trade publications considered eight years to be the maximum life of similar conveyor belt systems. As a result, Forrest prepared a second analysis based on this new information. When Rolland saw the second analysis, he told Forrest to discard this revised material, warned him not to discuss the new estimates with anyone at IDI, and ordered him not to present any of this information to the board of directors. Required: 1. Prepare a net-present-value analysis of the purchase and installation of the material-handling system using the revised estimates obtained by Leland Forrest. (For this problem, ignore the half-year convention. Assume annual straight-line depreciation of $562,500, which is $4,500,000 divided by 8) 2. Explain how Leland Forrest, a management accountant, should evaluate Bill Rolland's directives to repress the revised analysis. Take into consideration the specific ethical standards of competence, confidentiality, integrity, and objectivity discussed in Chapter 1. 3. Identify some steps Leland Forrest could take to resolve this situation. Explain how Leland Forrest, a management accountant, should evaluate Bill Rolland's directives to repress the revised analysis. T consideration the specific ethical standards of competence, confidentiality, integrity, and objectivity discussed in Chapter 1. Referring to the specific ethical standards of competence, confidentiality, integrity, and objectivity, Leland Forrest should evaluate Competence. Confidentiality. Integrity Objectivity Forrest has a responsibility to present complete and clear reports and recommendatio after appropriate analyses of relevant and reliable information. Rolland does not wish report to be complete or clear and has provided some information that is not reliable. Forrest should not disclose confidential information outside the organization. Howeve also appears that Rolland wants to refrain from disclosing important information to th board. Rolland is engaging in activities that could prejudice him from carrying out his duties ethically. In evaluating Rolland's directive as it affects Forrest, Forrest has an obligation communicate unfavorable as well as favorable information and professional judgments opinions. The responsibility to communicate information fairly and objectively, as well as to disc fully all relevant information that could reasonably be expected to influence an intende user's understanding of the reports and recommendations presented, is being hamper The board will not have the full scope of information they should have when they are presented with the analysis. 3. Identify some steps Leland Forrest could take to resolve this situation. If Forrest cannot obtain a satisfactory resolution with Rolland, he should take the situ up to the next layer of management and inform Rolland that he is doing this. If this is n satisfactory, Forrest should progress to the next, and subsequent, higher levels of management (e.g., the president or board of directors) until the issue is resolved. If this policy does not resolve the ethical conflict, the next step is for Forrest to discus situation with his supervisor, Rolland, and see if he can obtain resolution. One possible solution is to present a \"base case\" and sensitivity analysis of the investment. Forrest s make it clear to Rolland that he has a problem and is seeking guidance. If Forrest cannot satisfactorily resolve the situation within the organization, he may r from the company and submit an informative memo to an appropriate person in IDI (e president or board of directors). Forrest should first investigate to see if Instant Dinners, Inc. (IDI) has an established for resolution of ethical conflicts and follow those procedures. Forrest should first investigate to see if Instant Dinners, Inc. (IDI) has an established for resolution of ethical conflicts and follow those procedures. irectives to repress the revised analysis. Take into d objectivity discussed in Chapter 1. objectivity, Leland Forrest should evaluate Bill Rolland's directives as follows: ete and clear reports and recommendations liable information. Rolland does not wish the ded some information that is not reliable. mation outside the organization. However, it om disclosing important information to the ejudice him from carrying out his duties it affects Forrest, Forrest has an obligation to e information and professional judgments or on fairly and objectively, as well as to disclose onably be expected to influence an intended mmendations presented, is being hampered. rmation they should have when they are ution with Rolland, he should take the situation rm Rolland that he is doing this. If this is not ext, and subsequent, higher levels of directors) until the issue is resolved. nflict, the next step is for Forrest to discuss the e if he can obtain resolution. One possible tivity analysis of the investment. Forrest should m and is seeking guidance. ituation within the organization, he may resign e memo to an appropriate person in IDI (e.g., the ant Dinners, Inc. (IDI) has an established policy hose procedures. Explain how Leland Forrest, a management accountant, should evaluate Bill Rolland's directives to repress the revised analysis. T consideration the specific ethical standards of competence, confidentiality, integrity, and objectivity discussed in Chapter 1. Referring to the specific ethical standards of competence, confidentiality, integrity, and objectivity, Leland Forrest should evaluate Competence. Confidentiality. Integrity Objectivity Forrest has a responsibility to present complete and clear reports and recommendatio after appropriate analyses of relevant and reliable information. Rolland does not wish report to be complete or clear and has provided some information that is not reliable. Forrest should not disclose confidential information outside the organization. Howeve also appears that Rolland wants to refrain from disclosing important information to th board. Rolland is engaging in activities that could prejudice him from carrying out his duties ethically. In evaluating Rolland's directive as it affects Forrest, Forrest has an obligation communicate unfavorable as well as favorable information and professional judgments opinions. The responsibility to communicate information fairly and objectively, as well as to disc fully all relevant information that could reasonably be expected to influence an intende user's understanding of the reports and recommendations presented, is being hamper The board will not have the full scope of information they should have when they are presented with the analysis. 3. Identify some steps Leland Forrest could take to resolve this situation. If Forrest cannot obtain a satisfactory resolution with Rolland, he should take the situ up to the next layer of management and inform Rolland that he is doing this. If this is n satisfactory, Forrest should progress to the next, and subsequent, higher levels of management (e.g., the president or board of directors) until the issue is resolved. If this policy does not resolve the ethical conflict, the next step is for Forrest to discus situation with his supervisor, Rolland, and see if he can obtain resolution. One possible solution is to present a \"base case\" and sensitivity analysis of the investment. Forrest s make it clear to Rolland that he has a problem and is seeking guidance. If Forrest cannot satisfactorily resolve the situation within the organization, he may r from the company and submit an informative memo to an appropriate person in IDI (e president or board of directors). Forrest should first investigate to see if Instant Dinners, Inc. (IDI) has an established for resolution of ethical conflicts and follow those procedures. Forrest should first investigate to see if Instant Dinners, Inc. (IDI) has an established for resolution of ethical conflicts and follow those procedures. irectives to repress the revised analysis. Take into d objectivity discussed in Chapter 1. objectivity, Leland Forrest should evaluate Bill Rolland's directives as follows: ete and clear reports and recommendations liable information. Rolland does not wish the ded some information that is not reliable. mation outside the organization. However, it om disclosing important information to the ejudice him from carrying out his duties it affects Forrest, Forrest has an obligation to e information and professional judgments or on fairly and objectively, as well as to disclose onably be expected to influence an intended mmendations presented, is being hampered. rmation they should have when they are ution with Rolland, he should take the situation rm Rolland that he is doing this. If this is not ext, and subsequent, higher levels of directors) until the issue is resolved. nflict, the next step is for Forrest to discuss the e if he can obtain resolution. One possible tivity analysis of the investment. Forrest should m and is seeking guidance. ituation within the organization, he may resign e memo to an appropriate person in IDI (e.g., the ant Dinners, Inc. (IDI) has an established policy hose procedures