Problem #1 : Answer three questions below based on the following capital analysis scenario:

Sam Stanton is on the capital budgeting committee for his company, Canton Tile. Ed Rhodes is an engineer for the firm. Ed expresses his disappointment to Sam that a project that was given to him to review before submission looks extremely good on paper. "I really hoped that the cost projections wouldn't pan out," he tells his friend. "The technology used in this is pie in the sky kind of stuff. There are a hundred things that could go wrong. But the figures are very convincing. I haven't sent it on yet, though I probably should."

"You can keep it if it's really that bad," assures Sam. "Anyway, you can probably get it shot out of the water pretty easily, and not have the guy who submitted it mad at you for not turning it in. Just fix the numbers. If you figure, for instance, that a cost is only 50% likely to be that low, then double it. We do it all the time, informally. Best of all, the rank and file don't get to come to those sessions. Your engineering genius need never know. He'll just think someone else's project was even better than his."

Required:

1. Who are the stakeholders in this situation?

2. Is it ethical to adjust the figures to compensate for risk? Explain.

3. Is it ethical to change the proposal before submitting it? Explain.

Problem #2 :

In the Excel template provided, there is data provided that a managerial accountant is analyzing for Agra Inc. The task is to analyze the data and make a recommendation to management as to which of the four projects they should choose.

Estimated income and net cash flow is given for five years as well as the required rate of return and minimum cash payback period desired by management.

1. Using the template calculate the cash payback period, annual rate of return, present value of the cash flows, net present value (NPV) and profitability index for each project.

2. Using your calculated data, recommend a project to management and explain the basis for it.