Author Question: A better solution to control estimation bias is to implement a post-audit program and to link the ... (Read 158 times)

JimmyJoe · **on:** Aug 7, 2023

Question 1

ZumBahlen Inc. is considering the following mutually exclusive projects:

	Project A	Project B
Year	Cash Flow	Cash Flow
0	–$6,000	–$6,000
1	300	3,100
2	900	3,200
3	3,300	1,000
4	5,400	500

At what cost of capital will the NPV of the two projects be the same? (That is, what is the “crossover” rate?)

◦

15.85%

◦

16.24%

◦

16.71%

◦

17.30%

Question 2

A better solution to control estimation bias is to implement a post-audit program and to link the accuracy of forecasts to the compensation of the managers who initiated the projects.

◦ true
◦ false

Karla347 · **Reply #1 on:** Aug 7, 2023

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