The firm you work for is consider investing $100,000 in employee training (an operating expense) to improve employee retention. It has been estimated the costs savings from the improved retention is approximately $30,000 per year. Another analyst at the firm suggests that if the present value of the increase in the firm’s after-tax operating profit (from the cost savings due to the improved retention) is greater than the $100,000 outflow, then the firm should invest. Do you agree with this analyst’s statement? Fully Explain!

Your parents own a restaurant and are considering expanding to a new location. An investment advisor told your parents that the systematic risk of this investment is very high. Explain this comment by the investment advisor to your parents.

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Regarding the first scenario of investing in employee training the analyst suggests that the firm should invest if the present value of the increase i... View the full answer