What is payback from the financial perspective? Why would a manager choose to use this approach to investment analysis?
What will be an ideal response?
The payback method determines how much time will elapse before the total of after-tax cash flows will equal, or pay back, the initial investment. Even though it is scorned by many academics, the payback method continues to be widely used, particularly at lower management levels. It can be quickly and easily applied and gives decision makers some idea of how long recovery of invested funds will take. Uncertainty surrounds every investment project. The costs and revenues on which analyses are based are best estimates, not actual values. An investment project with a quick payback is not considered as risky as one with a long payback. The payback method also has drawbacks. A major criticism is that it encourages managers to focus on the short run. A project that takes a long time to develop but generates excellent cash flows later in its life usually is rejected under the payback method. The payback method also has been criticized for its failure to consider the time value of money.
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A business is considering a cash outlay of $200,000 for the purchase of land, which it could lease for $35,000 per year. If alternative investments are available which yield an 18% return, the opportunity cost of the purchase of the land is:
A) $35,000 B) $36,000 C) $ 1,000 D) $37,000
What is “one-line consolidation,” and when is it used?
What will be an ideal response?
Awareness building in diversity training is designed to
A. make managers aware of the need to give members of minority groups low-status jobs. B. make managers aware of the problems involved in promoting workplace diversity. C. educate employees on ways to improve their interpersonal skills. D. increase recognition of the meaning and importance of valuing diversity. E. impart specific skills to managers.
Which of the following is not a production strategy that offers a flexible process required for mass customization?
a. lean manufacturing b. synchronous manufacturing c. agile manufacturing d. poke yoke