(CFO) of New Age Fashion Lta t received a request from a project manager lo auhonze an expene 145,00 hanager states that this expenditur necessary fo last stage developmer a space navigation system, which s based anguage called Xtor. As a space engineer and financial manager, you know that Xtor is almost obsolete and is being replaced by alternatives that provide better cross-platform compatibility. However, the project manager insists that they should continue with the last tranche of payment because over £1.5 million as already been spent on developing this navigation system. It would be a shame to waste all the time and resources that have been invested. Advise the CFO regarding whether she should authorize the £45,000 proposed expenditure. Use marginal cost-benefit analysis to explain your reasoning. hich of the following statements correctly describes your decision? DA The CFO should authorize the £45,000 expenditure to continue the project because the marginal cost-benefit analysis treats the £1.5 million as part of the project's initial capital outlay that can be recovered only if the project is implemented. OB. The CFO should not authorize the £45,000 expenditure to continue the project even if the project will generate a positive net present value. The marginal cost-benefit analysis treats the £1.5 million as a cost that is extremely unlikely to be recovered and the £45,000 expenditure will also become a cost unlikely to be recovered. OC. The CFO should authorize the £45,000 expenditure to continue the project if the project will generate a positive net present value. The marginal cost-benefit analysis treats the £1.5 million as a cost that is irrelevant to the current decision making. OD. The CFO should not authorize the £45,000 expenditure to continue the project because it is surpassed by the new technology. Though the marginal cost-benefit analysis treats the £1.5 million as a cost that is irrelevant to the current decision making, continuing the project would be inadvisable even if the £45,000 expenditure generates a positive net present value.
(CFO) of New Age Fashion Lta t received a request from a project manager lo auhonze an expene 145,00 hanager states that this expenditur necessary fo last stage developmer a space navigation system, which s based anguage called Xtor. As a space engineer and financial manager, you know that Xtor is almost obsolete and is being replaced by alternatives that provide better cross-platform compatibility. However, the project manager insists that they should continue with the last tranche of payment because over £1.5 million as already been spent on developing this navigation system. It would be a shame to waste all the time and resources that have been invested. Advise the CFO regarding whether she should authorize the £45,000 proposed expenditure. Use marginal cost-benefit analysis to explain your reasoning. hich of the following statements correctly describes your decision? DA The CFO should authorize the £45,000 expenditure to continue the project because the marginal cost-benefit analysis treats the £1.5 million as part of the project's initial capital outlay that can be recovered only if the project is implemented. OB. The CFO should not authorize the £45,000 expenditure to continue the project even if the project will generate a positive net present value. The marginal cost-benefit analysis treats the £1.5 million as a cost that is extremely unlikely to be recovered and the £45,000 expenditure will also become a cost unlikely to be recovered. OC. The CFO should authorize the £45,000 expenditure to continue the project if the project will generate a positive net present value. The marginal cost-benefit analysis treats the £1.5 million as a cost that is irrelevant to the current decision making. OD. The CFO should not authorize the £45,000 expenditure to continue the project because it is surpassed by the new technology. Though the marginal cost-benefit analysis treats the £1.5 million as a cost that is irrelevant to the current decision making, continuing the project would be inadvisable even if the £45,000 expenditure generates a positive net present value.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Question 4, Warm-Up 1-4 (static)
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The chief financial officer (CFO) of New Age Fashion Ltd. has just received a request from a project manager to authorize an expenditure in the amount of £45,000. The manager states that this expenditure is necessary for the last stage development of a space navigation system, which is based on a programming
language called Xtor. As a space engineer and financial manager, you know that Xtor is almost obsolete and is being replaced by alternatives that provide better cross-platform compatibility. However, the project manager insists that they should continue with the last tranche of payment because over £1.5 million
has already been spent on developing this navigation system. It would be a shame to waste all the time and resources that have been invested. Advise the CFO regarding whether she should authorize the £45,000 proposed expenditure. Use marginal cost-benefit analysis to explain your reasoning.
Which of the following statements correctly describes your decision?
A. The CFO should authorize the £45,000 expenditure to continue the project because the marginal cost-benefit analysis treats the £1.5 million as part of the project's initial capital outlay that can be recovered only if the project is implemented.
B. The CFO should not authorize the £45,000 expenditure to continue the project even if the project will generate a positive net present value. The marginal cost-benefit analysis treats the £1.5 million as a cost that is extremely unlikely to be recovered and the £45,000 expenditure will also become a cost
unlikely to be recovered.
OC. The CFO should authorize the £45,000 expenditure to continue the project if the project will generate a positive net present value. The marginal cost-benefit analysis treats the £1.5 million as a cost that is irrelevant to the current decision making.
O D. The CFO should not authorize the £45,000 expenditure to continue the project because it is surpassed by the new technology. Though the marginal cost-benefit analysis treats the £1.5 million as a cost that is irrelevant to the current decision making, continuing the project would be inadvisable even if the
£45,000 expenditure generates a positive net present value.
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