Professional Documents
Culture Documents
Illustrative Questions
1. What changes, if any, should Lucy Morris ask Frank Greystock make in his discounted
cash flow (DCF) analysis? Why?
2. What should Morris be prepared to say to the Transport Division, the director of sales, her
assistant plant manager, and the analyst from the Treasury Staff?
3. How attractive is the Merseyside project? By what criteria?
4. Should Morris continue to promote the project for funding?
Additional Questions
Case considerations
1. The identification of relevant cash flows and, in particular, the treatment of the following:
a. sunk costs
b. cash flows obtained by cannibalizing another activity within the firm
c. exploitation of excess transportation capacity
d. corporate overhead allocations
e. cash flows of unrelated projects
f. inflation
2. The critical assessment of a capital-investment evaluation system
3. The treatment of conflicts of interest and other ethical dilemmas that may arise in
investment decisions