Forklift operators to attend a two-day forklift safety class

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Reference no: EM131336689

Food Distributors Inc. (FDI) is evaluating whether to require its forklift operators to attend a two-day forklift safety class. The company has 250 forklift operators and the cost of the course is $500 each. If all 250 operators attend the class, the firm’s insurance company has agreed to reduce the firm’s workers comp insurance premiums by $50,000 immediately, and by $30,000 in each of the next three years. Assume that premiums are prepaid on the last day of the year for coverage the following year. From management’s prospective, the only benefit to accrue to the firm is a reduction in insurance premiums. The firm’s chief financial officer (CFO) has informed you that the firm’s appropriate cost of capital is 8%. Should the firm require its forklift operators to attend the safety course? Does your answer change if the firm’s cost of capital rises (immediately) to 10%?

Reference no: EM131336689

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Forklift operators to attend a two-day forklift safety class : Food Distributors Inc. (FDI) is evaluating whether to require its forklift operators to attend a two-day forklift safety class. The company has 250 forklift operators and the cost of the course is $500 each. If all 250 operators attend the class, the..

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