The Finance Director of Kawabwa Construction plc recently overhauled the control system and designed a new method of assessing capital investments that applies the NPV rule to all new investment proposals and will assess performance of current of investments by the same method. He has created a report that will go to the board of directors monthly. This will give an NPV estimation to the cash flows produced and expected by each investment, and CFO plans to use this as a signaling device on the performance of all investments. This, he claims, will introduce rigour into the whole use of capital process. The Chairman ventured the opinion that this approach was a receipt for disaster. Why do you think he felt this way?
Question 5
The Finance Director of Kawabwa Construction plc recently overhauled the
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