Why is it important to consider real options in the capital budgeting process? Give two specific examples
What will be an ideal response?
Answer: The outcomes of a project are rarely known with certainty before the project is undertaken and are often not immutable. The ability to alter the course of a project may turn a negative NPV to positive or make a project less risky once abandonment cash flows are considered. For example, a movie or a new video game might have a negative NPV, but if there is a serious possibility of a sequel or large cash flows from the rental market, the expected NPV might turn positive. Likewise, the option to sell a building or machinery if a project fails may greatly reduce the negative impact on the business. (Examples will vary greatly.)
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Egalitarian structures are related to greater performance when the workflow depends more on individual contributions.
Answer the following statement true (T) or false (F)
Owen's Furniture manufactures a small table and a large table. The small table sells for $900, has variable costs of $550 per table, and takes 10 direct labor hours to manufacture. The large table sells for $1,600, has variable costs of $970, and takes eight direct labor hours to manufacture. The company has a maximum of 5,000 direct labor hours per month when operating at full capacity. If there are no constraints on sales of either of the products and the company could choose any proportions of product mix that they wanted, the maximum contribution margin that the company could earn will be ________.
A) $1,000,000 B) $606,250 C) $1,606,250 D) $393,750
The core body of knowledge for any profession outlines an agreed-upon code of ethics and practices for those who practice in that profession
a. True b. False Indicate whether the statement is true or false
Randall is given five acres of land in 2005. At the time of the gift, the land had a fair market value of $182,000 and its adjusted basis to the donor was $160,000. What is Randall's gain if he sells the land for $184,000?
What will be an ideal response?