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Virtually all larger corporations have established ethics codes which set out the company's values, ethics, objectives and responsibilities. The company’s code of ethics is designed to serve as a guide to proper business conduct for all employees. With regard to project selection and capital budgeting, we have focused on the quantitative considerations in the decision process. However, decision makers need to keep in mind that nonfinancial considerations may be important elements in project selection. How does a company’s code of ethics apply to project selection and capital budgeting? For most companies, ethical considerations are mainly focused on the reduction of potential risk associated with a project. For example, a company might be concerned with employees being familiar with the regulatory and procurement laws to avoid criminal and civil sanctions for not performing according to those regulations. However, another way to incorporate non financial considerations into capital project evaluation is to take into account the likely effects of the decisions on non shareholder stakeholders. Your textbook uses the example of Chipotle’s decision on sourcing food which is better tasting, better for the animals, better for the environment and better for the farmers. The article in your textbook closes with the statement that Chipotle’s focus on doing “the right thing” has resulted in increased sales and higher stock prices. Of course, this article was based on the years before the events involved in food poisoning. Requirement: Identify a company that has taken into consideration the effect of its decisions on non shareholder stakeholders. Discuss the decision and the effects of the decision on the stakeholders and the environment.
A few months ago, Ramona Castile opended a store called "Looking Good" that specializes in beauty products.
How do the external environmental factors -social, technological, political, ad taxation-affect a clients fnancial plan?
A project that provides annual cash flows of $28,500 for nine years costs $138,000 today. If the required return is 8 percent, the NPV for the project is $_____ . If the required return is 20 percent, the NPV is $______. At a discount rate of ___perc..
AJB Real Estate purchased a ten-acre tract of land for $320,000. The company divided the land into four lots of two and one-half acres each. Lot 1 had a beautiful view of the mountains and was valued at $160,000. Lot 2 had a stream running through it..
Crisp Cookware's common stock is expected to pay a dividend of $2 a share at the end of this year (D1 = $2.00); its beta is 1.20; the risk-free rate is 5%; and the market risk premium is 6%. The dividend is expected to grow at some constant rate g, a..
You require a return of 9 percent and use a light fixture 500 hours per year. What is the break-even cost per kilowatt-hour?
It takes Cookie Cutter Modular Homes, Inc., about six days to receive and deposit checks from customers. Cookie Cutter’s management is considering a lockbox system to reduce the firm’s collection times. What is the reduction in outstanding cash balan..
Agency conflicts arise when there are differences in the goals of the firm versus the personal goals of managers. What qualitative considerations are important for the mitigation of agency conflicts in relation to the acceptance and completion of cap..
Wyler Inc. has a beginning cash balance of $380 on March 1. The firm has projected sales of $550 in February, $700 in March, and $800 in April. The cost of goods sold is equal to 75 percent of sales. Goods are purchased one month prior to the month o..
You have just put your house up for sale. The agent tells you that two offers have been made: (1) 400,000 now and 400,000 in 2 years; and, (2) 287,500 now, 237,500 in 1 year and 275,000 in 2 years. Your agent says that one offer seems “just as good” ..
A 20-year U.S. Treasury bond with a face value of $10,000 pays a coupon of 5.50% (2.750% of face value every six months). The semiannually compounded interest rate is 5.2% (a six-month discount rate of 5.2/2 = 2.6%). What is the present value of the ..
What are some organizations or firms that provide political risk insurance?
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