This paper circulates around the core theme of Assume that all the division managers do overstate cash flow projections in their proposals. What would you do if you were recently promoted to division manager and had to compete for funding under these circumstances? together with its essential aspects. It has been reviewed and purchased by the majority of students thus, this paper is rated 4.8 out of 5 points by the students. In addition to this, the price of this paper commences from £ 99. To get this paper written from the scratch, order this assignment now. 100% confidential, 100% plagiarism-free.
Competing Investment Proposals
The division managers of Chester Construction Corporation submit
capital investment proposal each year for evaluation at the corporate
level. Typically, the total dollar amount requested by the divisional
managers far exceeds the company’s capital investment budget. Thus, each
proposal is first ranked by its estimated net present value as a
primary screening criterion. Jeff Hensel, the manager of Chester’s
commercial construction division, often overstates the projected cash
flows associated with his proposals, and thereby inflates their net
present values. He does so because, in his words, “Everybody else is
doing it.”
a. Assume that all the division managers do overstate cash flow
projections in their proposals. What would you do if you were recently
promoted to division manager and had to compete for funding under these
circumstances?
b. What controls might be implemented to discourage the routine
overstatement of capital budgeting estimates by the division managers?
