The net present value of the proposal to be positive

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Dan Mayer manages a factory for Clark Inc. A sales person for new factory equipment has persuaded Dan that the new equipment offered by her company would be less dangerous for the employees and lower the sound level in the factory significantly. Dan believes that employees would be more satisfied with their jobs as a result of reduced danger and lower sound levels. Dan has always said that satisfied employees are more productive. Thus, in making the cash flow estimates for the new equipment, Dan has included increased cash flows from increased productivity. In fact, these estimated increases in productivity are just enough to allow the net present value of the proposal to be positive.

Name at least two reasons why the net present value estimates could be optimistic.

Reference no: EM131352362

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