Accounting Information Systems
Accounting Information Systems
11th Edition
ISBN: 9781337676557
Author: Ulric J. Gelinas; Richard B. Dull; Patrick Wheeler
Publisher: Cengage Learning US
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Chapter 2, Problem 7DQ
Summary Introduction

To explain: The reason why a firm might decide to implement only certain modules of an ERP system.

Introduction:

Enterprise resource planning (ERP) system:

It is the combined management of different activities including the core business functions such as human resources, back room activities and other with the help of well-developed software and technology.

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Scenario one: Under what circumstances would it be appropriate for a firm to use different cost of capital for its different operating divisions? If the overall firm WACC was used as the hurdle rate for all divisions, would the riskier division or the more conservative divisions tend to get most of the investment projects? Why? If you were to try to estimate the appropriate cost of capital for different divisions, what problems might you encounter? What are two techniques you could use to develop a rough estimate for each division’s cost of capital?
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