Question
Which of the following statements best exemplifies an ethical dilemma a manager might face when making long-term investment decisions? a. Rachel was asked to approve
Which of the following statements best exemplifies an ethical dilemma a manager might face when making long-term investment decisions?
a. Rachel was asked to approve the purchase of new equipment. The rate of return exceeds the hurdle rate.
b. Diego is deciding whether or not to approve the purchase of new equipment. The net present value of the discounted cash flows equals zero.
c. Sarah is deciding whether or not her company should invest in additional equipment. The rate of return for the equipment is lower than the cost of capital.
d. Ignacio is deciding whether or not to purchase new equipment. His bonus is calculated as a percentage of the increase in net income from year 1 to year 2. Please also explain briefly why the incorrect options are wrong.
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