What are post-audits? When are they conducted?
A post-audit compares the real capital investment comes out with the expected results which should be achieved on a standard basis.
A post-audit is supposed to compare the results of actual capital speculation with those anticipated. Companies can use the comparisons to see if their speculation is performing as anticipated and should be supported, or if they should end the project and offer assets.
Post-audits should be attempted regularly all through the project's life cycle, not as it were at the conclusion. Managers can make changes to projects over their life expectancy much obliged to intermediate post-audits. Managers moreover use post-audit input to make strides and forecasts for future projects. Managers will be more slanted to supply practical gauges with their capital investment demands in case they anticipate scheduling post-audits.
Hudson Manufacturing is considering three capital investment proposals. At this time, Hudson only has funds available to pursue one of the three investments.
Present value of net cash inflows
Which investment should Hudson pursue at this time? Why?
Refer to the Hunter Valley Snow Park Lodge expansion project in Short Exercise S26-4 and your calculations in Short Exercises S26-5 and S26-6. Assume the expansion has zero residual value.
1. Will the payback change? Explain your answer. Recalculate the payback if it changes. Round to one decimal place.
2. Will the project’s ARR change? Explain your answer. Recalculate ARR if it changes. Round to two decimal places.
3. Assume Hunter Valley screens its potential capital investments using the following decision criteria:
Maximum payback period
Maximum accounting rate of return
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