This is a Good Investment - Be Sure the Numbers Show That It Is! What should Oliver
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This is a Good Investment - Be Sure the Numbers Show That It Is!
What should Oliver do?
What would you do if you were Oliver?
Would your answer change if you knew Mrs. Wilson had recently sold much of the Cybercomp stock?
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- Finance eBook: Principles of Finance 411 11 11 E 11₂ 19 9 B How Project Risk is Considered in Capital Budgeting Decisions > Multinational Capital Budgeting Questions Problems 3 Problem Computer-Related Problem Appendix 13A Appendix 13B Appendix 13C Ch 14: Capital Structure and Dividend Policy Decisions Jump to Page 525 525 529 532 543 544 547 547 551 553 527 818 M PREVIOUS PAGE 526 eBook: Principles of Finance ETHICAL DILEMMA E Oliver Greene is the assistant to the financial manager at Cybercomp, Inc., a company that develops software to drive network communica- tions for personal computers. Oliver joined Cybercomp three years ago following his graduation from college. His primary responsibility has been to evaluate capital budgeting projects and make investment recommenda- tions to the board of directors. Oliver enjoys his job I very much; he often finds himself challenged with interesting tasks, and he is paid extremely well. Last week, Oliver started evaluating the capital proj- ects that have been proposed for investment this year. One proposal calls for Cybercomp to purchase NetWare Products, a company that manufactures circuit boards called network cards, which are required to achieve com- munication connectivity between personal computers. Cybercomp packages network cards with the software that it sells, but it currently purchases those circuit boards from another manufacturer. The proposal, which was submitted by Nadine Wilson, Cybercomp's CEO, suggests that the company might reduce costs and increase profit margains by producing the network (? Q TT □ Quick Tour Print Search Annotations Accessibility Bookmark This Is a Good Investment-Be Sure the Numbers Show That It Is! Oliver was troubled by the meeting. His "gut feeling" was that something was wrong, but he hadn't yet had time to carefully examine the proposal. In fact, his evalua- tion was very cursory, and he was far from making a final decision about the acceptability of the proposed capital budgeting project. Oliver felt he needed much more infor- mation before he could make a final recommendation. Oliver has spent the entire day examining the apprai- sal report provided by Mrs. Wilson and trying to gather additional information about the proposed investment. The report contains some background information con- cerning NetWare's operations, but crucial financial data are missing. Further investigation into NetWare Products has produced little information. Oliver has discovered that the company's stock is closely held by a small group of investors. These investors own numerous busi- nesses and contribute generously to the local university, which happens to be Mrs. Wilson's alma mater. In addi- tion, Oliver's secretary has informed him that the gossip around the "water cooler" at Cybercomp suggests that Mrs. Wilson and the owners of NetWare are old college buddies, and she might even have a stake in NetWare. This morning. Mrs. Wilson called Oliver and repeated NEXT PAGE 528 ; - Finance eBook: Principles of Finance 411 11 11 E 11₂ 19 9 B How Project Risk is Considered in Capital Budgeting Decisions > Multinational Capital Budgeting Questions Problems 3 Problem Computer-Related Problem Appendix 13A Appendix 13B Appendix 13C Ch 14: Capital Structure and Dividend Policy Decisions Jump to Page 525 525 529 532 543 544 547 547 551 553 527 818 M PREVIOUS PAGE 526 eBook: Principles of Finance ETHICAL DILEMMA E Oliver Greene is the assistant to the financial manager at Cybercomp, Inc., a company that develops software to drive network communica- tions for personal computers. Oliver joined Cybercomp three years ago following his graduation from college. His primary responsibility has been to evaluate capital budgeting projects and make investment recommenda- tions to the board of directors. Oliver enjoys his job I very much; he often finds himself challenged with interesting tasks, and he is paid extremely well. Last week, Oliver started evaluating the capital proj- ects that have been proposed for investment this year. One proposal calls for Cybercomp to purchase NetWare Products, a company that manufactures circuit boards called network cards, which are required to achieve com- munication connectivity between personal computers. Cybercomp packages network cards with the software that it sells, but it currently purchases those circuit boards from another manufacturer. The proposal, which was submitted by Nadine Wilson, Cybercomp's CEO, suggests that the company might reduce costs and increase profit margains by producing the network (? Q TT □ Quick Tour Print Search Annotations Accessibility Bookmark This Is a Good Investment-Be Sure the Numbers Show That It Is! Oliver was troubled by the meeting. His "gut feeling" was that something was wrong, but he hadn't yet had time to carefully examine the proposal. In fact, his evalua- tion was very cursory, and he was far from making a final decision about the acceptability of the proposed capital budgeting project. Oliver felt he needed much more infor- mation before he could make a final recommendation. Oliver has spent the entire day examining the apprai- sal report provided by Mrs. Wilson and trying to gather additional information about the proposed investment. The report contains some background information con- cerning NetWare's operations, but crucial financial data are missing. Further investigation into NetWare Products has produced little information. Oliver has discovered that the company's stock is closely held by a small group of investors. These investors own numerous busi- nesses and contribute generously to the local university, which happens to be Mrs. Wilson's alma mater. In addi- tion, Oliver's secretary has informed him that the gossip around the "water cooler" at Cybercomp suggests that Mrs. Wilson and the owners of NetWare are old college buddies, and she might even have a stake in NetWare. This morning. Mrs. Wilson called Oliver and repeated NEXT PAGE 528 ;
Expert Answer:
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1 Oliver is faced with an ethical dilemma regarding the proposed acquisition of NetWare Products Considering the information provided Oliver should ta... View the full answer
Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
Posted Date:
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