Construction corporation submit capital investment proposals

Assignment Help Business Economics

Reference no: EM13744213

The division managers of Chester Construction Corporation submit capital investment proposals each year for evaluation at the corporate level. Typically, the total dollar amount requested by the divisional managers far exceeds the company’s capital investment budget. Thus, each proposal is first ranked by its estimated net present value as a primary screening criterion. Jeff Hensel, the manager of Chester’s commercial construction division, often overstates the projected cash flows associated with his proposals, and thereby inflates their net present values. He does so because, in his words, “Everybody else is doing it.”

a. Assume that all the division managers do overstate cash flow projections in their proposals.

What would you do if you were recently promoted to division manager and had to compete for funding under these circumstances?

b. What controls might be implemented to discourage the routine overstatement of capital budgeting estimates by the division managers?

Reference no: EM13744213

Questions Cloud

Demand shift to the left-the last firm that entered : Consider s market where there are many firms with different cost structures. If demand shift to the left (decreases), the last firm that entered____.

What is meant by the diagnostic-related groups : Describe what is meant by the Diagnostic-Related Groups. Please supply reference, no copy and paste and please no Plagiarism

Citizens to save money cause economic problems : How and why can the decision of U.S. citizens to save money cause economic problems for the economy? So, if the economy is in a recession, who is at fault: business, households, or government?

Write a research paper ongettysburg battle : Write a Research Paper onGETTYSBURG BATTLE: Battle Analysis- When and why did this particular battle take place? Where did it take place? What influenced the outcome of this battle?

Construction corporation submit capital investment proposals : The division managers of Chester Construction Corporation submit capital investment proposals each year for evaluation at the corporate level. Typically, the total dollar amount requested by the divisional managers far exceeds the company’s capital i..

Discussion question on inflation : To show the gradual development of inflationary pressures in the postwar U.S. economy, and to show why these pressures posed problems for policymakers and also for Keynesian economics.

What is the full employment level of real gdp : The Natural Rate of Unemployment is 5% with the current unemployment rate of 10%. The actual Real GDP is $500. What is the Full Employment (Potential) level of Real GDP?

Salvage value of the machinery and equipment is expected : Consideration is being given to the investment of $420,000 at time zero for machinery and equipment to be depreciated using 7 year straight line depreciation starting in year 1 with the half-year convention. Annual sales are projected to be $450,000 ..

Identify bill of rights and which time period it is from : identify bill of rights and which time period it is from and how it is significant to American history.

User Account

All Pages