Two managers of Marshall, Inc., assessed a proposed project in Jamaica. Each manager used exactly the same estimates of the earnings to be generated by the project, as these estimates were provided by other employees. The managers agree on the proportion of funds to be remitted each year, the life of the project, and the discount rate to be applied. Both managers also assessed the project from the U.S. parent’s perspective. Nevertheless, one manager determined that this project had a large net present value, while the other manager determined that the project had a negative net present value. Explain the possible reasons for such a difference.

FindFind

International Financial Management

14th Edition
Madura
Publisher: Cengage
ISBN: 9780357130698
FindFind

International Financial Management

14th Edition
Madura
Publisher: Cengage
ISBN: 9780357130698

Solutions

Chapter 14, Problem 1ST
Textbook Problem

Two managers of Marshall, Inc., assessed a proposed project in Jamaica. Each manager used exactly the same estimates of the earnings to be generated by the project, as these estimates were provided by other employees. The managers agree on the proportion of funds to be remitted each year, the life of the project, and the discount rate to be applied. Both managers also assessed the project from the U.S. parent’s perspective. Nevertheless, one manager determined that this project had a large net present value, while the other manager determined that the project had a negative net present value. Explain the possible reasons for such a difference.

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