Eshe works for a not-for-profit group that recycles computers and other equipment to communities in rural Africa.

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Eshe works for a not-for-profit group that recycles computers and other equipment to communities in rural Africa. The group collects two- to three-year-old PCs and peripheral equipment from businesses, refurbishes the PCs, ships them to Africa, and distributes them for a nominal fee (which is often waived). Even though businesses donate the computers and equipment, Eshe’s group needs cash for operating expenses. It therefore seeks grants from foundations such as the Gates Foundation and the Rockefeller Foundation that support charitable endeavors. Eshe’s dilemma concerns one such grant that could fund a substantial portion of next year’s operations.
Eshe’s problem is that the volume of computers distributed has stabilized and has even begun a slight downturn. Businesses began to keep their machines for longer periods, and the rapid change in technology has made obsolescence a major issue. Eshe had prepared the grant application with the best available data and her best estimate of the volume next year (down 5% from current volumes). The application also shows a similar downtrend for the near future.
Eshe’s supervisor, the charity’s CEO, is convinced that the grant application would be denied if the group projects a declining activity level. Without adequate funds, he will have to scale back dramatically. He further notes that restarting the initiative two to three years later is like starting over because the government and other contacts in Africa would have atrophied. He thinks that the downturn is temporary and that volume would pick up over the next two to three years. He accordingly asks Eshe to revise her estimates and show a 5% increase in volume for next year. He argues that even the best estimate is “gazing into a crystal ball” and that a 5% increase might occur, even though it is not a high probability event.

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What should Eshe do?

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Related Book For  book-img-for-question

Managerial accounting

ISBN: 978-0471467854

1st edition

Authors: ramji balakrishnan, k. s i varamakrishnan, Geoffrey b. sprin

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