SYSTEMS SELECTION
Your company. Kitchen Works, is employing the SDLC for its new information system. The company is currently performing a number of feasibility studies, including the economic feasibility study. A draft of the economic feasibility study has been presented to you for your review. You have been charged with determining whether only escapable costs have been used, the present value of
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Chapter 13 Solutions
Accounting Information Systems
- Good managers not only identify and evaluate realoptions in projects—they also structure projects soas to create real options. Suppose a company isconsidering a project to build an electric generating plant. Name some real options that might bebuilt into the project, explain how they could beevaluated, and discuss their effects on the project’sNPV.arrow_forwardThe Miramar Company is going to introduce one of three new products: a widget, a hummer, or a nimnot. The market conditions (favorable, stable, or unfavorable) will determine the profit or loss the company realizes, as shown in the following payoff table: a. Compute the expected value for each decision and select the best one. b. Develop the opportunity loss table and compute the expected opportunity loss for each product. c. Determine how much the firm would be willing to pay to a market research firm to gain better information about future market conditions.arrow_forwardGive two advantages and two disadvantages of using Net Present Value as an investment appraisal technique. Explain in no more than one sentence why each point you make is an advantage or disadvantage as if explaining to someone that has no understanding of the terminology or accounting jargon. The Graduate Recruitment Manager of WCITJ Ltd is interested in you as a potential summer intern and future employee. Like all employers, he is only impressed by students that are self motivated, that can communicate well, and those that research and read around their topics. He has asked you to explain, in one concise short paragraph each, three accounting concepts that you have read about during your initial study of accounting as part of your course.arrow_forward
- Why does a company evaluate both the money allocated to a project and the time allocated to the project? What is the next thing a company needs to do after it establishes investment criteria? What is the payback method used to determine? Why do businesses consider the time value of money before making an investment decision? A fellow student studying Financial Accounting says, “The net present value (NPV) weighs early receipts of cash much more heavily than more distant receipts of cash.” Do you agree or disagree? Why?arrow_forwardThe client is aware agriculture can be risky due to price volatility and climate. Explain ways you could take into account risk into decision-making as part of the investment appraisal. Discuss the different ways you might select a discount rate when evaluating different projects for the client.arrow_forwardComplete the following homework scenario:Compare the results of the three methods by quality of information for decision making. Using what you have learned about the three methods, identify the best project by the criteria of long term increase in value. (You do not need to do further research.) Convey your understanding of the Time Value of Money principles used or not used in the three methods. Review the video titled "NPV, IRR, MIRR for Mac and PC Excel" (located at and previously listed in Week 4) to help you understand the foundational concepts:Scenario Information:Assume that two gas stations are for sale with the following cash flows: CF1 is the Cash Flow in the first year, and CF2 is the Cash Flow in the second year. This is the timeline and data used in calculating the Payback Period, Net Present Value, and Internal Rate of Return. The calculations are done for you. Your task is to select the best project and explain your decision. The methods are presented and the decision…arrow_forward
- Complete the following homework scenario:Compare the results of the three methods by quality of information for decision making. Using what you have learned about the three methods, identify the best project by the criteria of long term increase in value. (You do not need to do further research.) Convey your understanding of the Time Value of Money principles used or not used in the three methods. Review the video titled "NPV, IRR, MIRR for Mac and PC Excel" (located at and previously listed in Week 4) to help you understand the foundational concepts:Scenario Information:Assume that two gas stations are for sale with the following cash flows: CF1 is the Cash Flow in the first year, and CF2 is the Cash Flow in the second year. This is the timeline and data used in calculating the Payback Period, Net Present Value, and Internal Rate of Return. The calculations are done for you. Your task is to select the best project and explain your decision. The methods are presented and the decision…arrow_forwardComplete the following homework scenario:Compare the results of the three methods by quality of information for decision making. Using what you have learned about the three methods, identify the best project by the criteria of long term increase in value. (You do not need to do further research.) Convey your understanding of the Time Value of Money principles used or not used in the three methods. Review the video titled "NPV, IRR, MIRR for Mac and PC Excel" (located at and previously listed in Week 4) to help you understand the foundational concepts:Scenario Information:Assume that two gas stations are for sale with the following cash flows: CF1 is the Cash Flow in the first year, and CF2 is the Cash Flow in the second year. This is the timeline and data used in calculating the Payback Period, Net Present Value, and Internal Rate of Return. The calculations are done for you. Your task is to select the best project and explain your decision. The methods are presented and the decision…arrow_forwardSpencer Enterprises is attempting to choose among a series of new investment alternatives. The potential investment alternatives, the net present value of the future stream of returns, the capital requirements, and the available capital funds over the next three years are summarized as follows: Develop and solve an integer programming model for maximizing the net present value. Assume that only one of the warehouse expansion projects can be implemented. Modify your model from part (a). Suppose that if test marketing of the new product is carried out, the advertising campaign also must be conducted. Modify your formulation from part (b) to reflect this new situation.arrow_forward
- You are analyzing a project and have prepared the following data: a. Based on the net present value of this project, should you reject or accept this project? (Please provide the formulas for calculation or the keys applied if a financial calculator is used) b. What is the internal rate of return (IRR) of this project? Should you reject or accept this project? (Please use a financial calculator and list the keys you use)arrow_forwardUse the information below and help the management in choosing the most desirable Project using all the following techniques:1) Payback Period Technique.2) Discounted Payback Period Technique.3) Net Present Value Technique4) Profitability Index Technique. Based on your answer which project is better and why? please show the steps and formula Thanksarrow_forwardExplain how you would evaluate the expected rate of return from the investment (purchasing a company) and the method to evaluate the investment decision. Assess the disadvantages and advantages of the investment method and why the method would provide the most accurate measure for the anticipated rate of return requirement. Justify your recommendation.arrow_forward
- Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,Essentials of Business Analytics (MindTap Course ...StatisticsISBN:9781305627734Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. AndersonPublisher:Cengage LearningEBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT