Companies must constantly invest in their current assets, or new projects in order to keep and/or attract potential consumersâ€™. Per Garrison, Noreen, & Brewer, (2014), â€œWhen considering investment opportunities, managers must make two types of decisions-screening decisions and preference decisions.â€ The screening decisions help determine whether a project will be a good investment or not. Some of the first few questions in screening decision can include, â€œWill this be an acceptable investment, will this best for the company?â€ Once the decision is made, it is now the preference decision. â€œHow can this investment bring in more revenue or how do we make this work?â€ The management team research all proposals prior to making a firm decision on whether to invest in a project. At times, these two decisions maker can be in conflict with one another. The management team review a net present value. The net present value helps management team make decisions on whether to invest in a project or not. Per Garrison, Noreen, & Brewer, (2014), â€œThe difference between the present value of these cash flows, called the net present value, determines whether or not a project is an acceptable investment.
Royal Caribbean Cruises is one of the leading cruise line, generating over $8 billion a year in sales. Recently, the cruise line invested over $1.4 billion dollars to build a new Oasis of the Seas, the third largest vessel compared to other cruise ship. After reviewing sales, the cruise line sales were less than the expected target. The Project Committee was tasked to review a post-audit to review all possible options to improve its sales.
The Projects Committee had review all required information in regards of the Oasis of the Seas. The committee started from the beginning; asking more detail questions, seeking if this investment was beneficial for the company and how to bring in sales to break even of the project. The committee found a few errors on the financial side, driving the committee to conduct a new net present value. The committee found that if the cruise ship increase in sales, that it will increase the net present value of the company. The company should add more cruises to its cruise line, as well as advertising the new cruise ship. The committee found that with the new data, the cruise line will increase sales, and improve the status of the investment.
Garrison, R., Noreen, E., & Brewer, P. (2014). Managerial accounting (15th ed.). Columbus, OH: McGraw-Hill Education.
PLEASE RESPOND TO THIS, I HAVE TO COMPLETE A PEER REVIEW ON THE ABOVE.
a) Point out what you perceived to be the strengths of the initial posting along with supporting rationale.
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For this response, should outside sources be used to support the content within the postings, proper in-text citations and correctly formatted references should be prepared consistent with the APA (6th edition). The list of references should be physically positioned at the end of the postings.