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Category > Business & Finance Posted 05 Jun 2017 My Price 8.00

it seems unlikely that the Wettway sailboat project

it seems unlikely that the Wettway sailboat project would fail to break even on an accounting basis. However, there appears to be a very good chance that the true NPV is negative. This illustrates the danger in looking at just the accounting break-even. What should Wettway do? Is the new project all wet? The decision at this point is essentially a managerial issue—a judgment call. The crucial questions are:

1. How much confidence do we have in our projections?

2. How important is the project to the future of the company?

3. How badly will the company be hurt if sales do turn out to be low? What options are available to the company in this case? We will consider questions such as these in a later section.

C O N C E P T Q U E S T I O N S

a If a project breaks even on an accounting basis, what is its operating cash flow?

b If a project breaks even on a cash basis, what is its operating cash flow?

c If a project breaks even on a financial basis, what do you know about its discounted payback?

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Status NEW Posted 05 Jun 2017 10:06 AM My Price 8.00

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