If the IRR is less than the WACC, the project should be rejected, as it impoverishes the firm’s owners. If the IRR equals the WACC, it earns only normal profits (i.e., the owners’ opportunity costs) and accepting it is a matter of indifference. In this care the project’s IRR is 18.031 > 11.88%, therefore the IRR rule tells us the same as the NPV rule: this project will enrich the firm’s owners. We note in passing that in more advanced courses in finance you would learn about projects for which this rule cannot be used. Broadly speaking, they are projects whose cash flows changes sign more than once—e.g., from negative to positive to negative again.
* What are the legal requirements? * Didn’t break any laws, related to him applying company funds towards personal use even though his act was solely beneficial to himself alone. What are the ethical duties? * Maintain price-competitive markets will ensure that scares resources are used to optimally satisfy consumer needs. * Pareto Optimality wasn’t obtained because maximum benefits of most wanted goods and services produced at minimum cost of least wanted resources.
Social Darwinism adapted Charles Darwin’s theory of evolution, “survival of the fittest,” to the business world, arguing that competition was necessary to foster the healthiest economy (just as competition in the natural world was necessary to foster the healthiest, or fittest, species). Proponents of social Darwinism adhered to a “help those who help themselves” philosophy: government shouldn’t invest in programs for the poor, because the poor had no positive impact on the nation’s financial health. The rich, meanwhile, were strong, hard working citizens who contributed to national progress, and, as such, should not be subject to government regulation. Prominent social Darwinists included Herbert Spencer and Andrew Carnegie, whose essay promoting free market economy, “The Gospel of Wealth,” was published in
Since the Walton Work Wear line is in the production stage, its accumulated development costs should be capitalized. The Carroway Cool Top has not started it commercial production which would allow the development costs not to be amortized yet. Also interest costs on loans to generate financing for the R&D activates of a product can be capitalized rather than expensed. The capitalization of interest would allow CCL to reduce taxable income in the future when it is more profitable. I would recommend that CCL make the above changes immediately so that the financail statements are not incorrect.
Jones purchase the stock of Smithon outright leaving Smithon intact? The stock should not be purchase by Mr. Jones. Mr. Jones acquiring the assets, liabilities and also would inherit the contractual obligations of the selling corporation, would, be the results of the purchase. In lay terms, he has bought the existing Smithon Corporation and he is responsible of ensuring daily operations run efficiently but the tax aspect of acquisition he is responsible for existing and any future tax liabilities that the selling corporation had. It would be my advice for Mr. Jones to not buy the stock because of the liability of current and future tax obligations which Mr. Jones would incur from the purchase of the stock.
Two Arguments against government/public ownership 1. Competition would give competing utilities an incentive to improve service as the consumer would have a choice. 2. If utilities were competitive there would be no danger of regulators not being fair when setting rates and allowing for licenses as there would be no monopoly for them to control. The company at hat served the public best would be favored in a competitive situation C. My opinion is that there should be a balance between competition and government involvement.
Suppose that Cornelius believes that Elliot is not a good hire for Pharma. Can he fire Elliot? Although Adams may have had the legal right to hire Elliot without the consent of the others, it was a morally wrong decision not to seek the consent of the other shareholding partners. As a privately held corporation which is small in size, the promotion of business efficiency is an objective best served by enabling the owners to arrange the organization of the enterprise as they choose unless such decisions are outside the scope of the partnership business which would make it impossible to
When the government prevents prices from adjusting naturally to supply and demand, efficiency is improved in the economy. ANSWER: F TYPE: T KEY1: D SECTION: 2 OBJECTIVE: 7 RANDOM: Y [cxviii]. A market economy cannot possibly produce a socially desirable outcome because individuals are motivated by their own selfish interests. ANSWER: F TYPE: T KEY1: D SECTION: 2 OBJECTIVE: 7 RANDOM: Y [cxix]. While the invisible hand cannot guarantee efficiency, it is better at guaranteeing equity.
Companies have an ethical obligation and responsibility towards consumers and stakeholders whether it is safety, product liability or the measures of a consumer’s worth. The 1968 Ford Motor Company Pinto case decision which allowed the vehicle to remain on the market even though the rear gas tank assembly had the tendency to explode and burst into flames if involved in a rear-end collision. The company disregarded safety and placed profit first when making the decision. The consumer’s safety and the product that companies manufactures should be considered their number one priority. As a member of the Ford Company, should I have to decide on recalling the vehicles or settling the case in which injury occurred I will take the option of recalling the vehicles.
Adam Smith lived through a mercantile system, which he highly opposed therefore the idea of a free market system seemed to be the best solution in a time period before the industrial revolution. Unlike Smith, Marx had personal accounts of the industrial revolution, therefore he would have “anticipated the high- technology, global interests of modern institutions, dangers of consuming non- renewable natural resources and the issue of post industrial unemployment.” Both tried to create a system where everyone could be happy but their views on capitalism as the better political system conflicted. Karl Marx’s and Adam Smith’s views on capitalism differed in terms of the division of labour, competition and the class structure in society. “The trade of the pin- maker: a workman not educated to this business (which the division of labour has rendered a distinct trade), nor acquainted with the use of the machinery employed in it (to the