Unit 8: Discussion
Royal Caribbean Cruises invested $1.4 billion to build the Oasis of the Seas, a cruise ship that carries 5,400 passengers and stands 20 stories above the sea. The vessel is a third larger than any other cruise ship and contains 21 pools, 24 restaurants, 13 retail shops, and 300-foot water slides.
When considering investment opportunities, managers must make two types of decisions—screening decisions and preference decisions. Screening decisions, which come first, pertain to whether or not a proposed investment is acceptable. Preference decisions come after screening decisions and attempt to answer the following question: “How do the remaining investment proposals, all of which have been screened and provide an acceptable rate of return, rank in terms of preference? That is, which one(s) would be best for the company to accept?”
Sometimes preference decisions are called rationing decisions, or ranking decisions. Limited investment funds must be rationed among many competing alternatives. Hence, the alternatives must be ranked. Either the internal rate of return method or the net present value method can be used in making preference decisions. However, as discussed earlier, if the two methods are in conflict, it is best to use the net present value method, which is more reliable. When using the internal rate of return (IRR) method to rank competing investment projects, the preference rule is: The higher the internal rate of return, the more desirable the project. The net present value (NPV) of one project cannot be directly compared to the NPV of another project unless the initial investments are equal.
After an investment project has been approved and implemented, a post-audit should be conducted. A post-audit involves checking whether or not expected results are actually realized. This is a key part of the capital budgeting process because it helps keep managers honest in their investment proposals. Any tendency to inflate the benefits or downplay the costs in a proposal should become evident after a few post-audits have been conducted. The post-audit also provides an opportunity to reinforce and possibly expand successful projects and to cut losses on floundering projects.
The same capital budgeting method should be used in the post-audit as was used in the original approval process. That is, if a project was approved on the basis of a NPV analysis, then the same procedure should be used in performing the post-audit. However, the data used in the post-audit analysis should be actual observed data rather than estimated data. This gives management an opportunity to make a side-by-side comparison to see how well the project has succeeded. It also helps assure that estimated data received on future proposals will be carefully prepared because the persons submitting the data knows that their estimates will be compared to actual results in the post-audit process. Actual results that are far out of line with original estimates should be carefully reviewed.
Garrison, R., Noreen, E., & Brewer, P. (2014). Managerial accounting (15th ed.). Columbus, OH: McGraw-Hill Education.
You’re an operations executive chairing the Projects Committee for Royal Caribbean Cruise Line. You’re committee has been tasked with conducting a post-audit of the Project: Oasis of the Sea. The committee is aware that the ship actual performance (financial) has fallen short of expectations. As Chair of the Projects Committee, you’re expected to prepare a report that outlines current status of the investment (project), and then present a plan to improve its performance in the foreseeable future. You will want to gather relevant information (financial, economic, etc.); explore and evaluate alternatives that will bring the Oasis of the Sea into the “black”; and document your plan, on behalf of the Projects Committee, using sound arguments that are well supported, properly vetted, and logically presented. It is important that management carefully consider any potential ethical implications associated with their stated position. If there are any potential ethical concerns associated with your position, they should be identified and discussed in the final recommendation.
If you prepared your response in Word, please cut and paste it directly into the discussion board so that everyone will not need to first download your response, then open it to read it.There is no minimum or maximum in terms of the word count; however, the response should explicitly address all required components of this discussion assignment. The document should be prepared consistent with the APA writing style (6th edition) and reflect higher level cognitive processing (analysis, synthesis, and or evaluation).
Why Work with Us
Top Quality and Well-Researched Papers
We always make sure that writers follow all your instructions precisely. You can choose your academic level: high school, college/university or professional, and we will assign a writer who has a respective degree.
Professional and Experienced Academic Writers
We have a team of professional writers with experience in academic and business writing. Many are native speakers and able to perform any task for which you need help.
Free Unlimited Revisions
If you think we missed something, send your order for a free revision. You have 10 days to submit the order for review after you have received the final document. You can do this yourself after logging into your personal account or by contacting our support.
Prompt Delivery and 100% Money-Back-Guarantee
All papers are always delivered on time. In case we need more time to master your paper, we may contact you regarding the deadline extension. In case you cannot provide us with more time, a 100% refund is guaranteed.
Original & Confidential
We use several writing tools checks to ensure that all documents you receive are free from plagiarism. Our editors carefully review all quotations in the text. We also promise maximum confidentiality in all of our services.
24/7 Customer Support
Our support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.
Try it now!
How it works?
Follow these simple steps to get your paper done
Place your order
Fill in the order form and provide all details of your assignment.
Proceed with the payment
Choose the payment system that suits you most.
Receive the final file
Once your paper is ready, we will email it to you.
No need to work on your paper at night. Sleep tight, we will cover your back. We offer all kinds of writing services.
No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.
Admission Essays & Business Writing Help
An admission essay is an essay or other written statement by a candidate, often a potential student enrolling in a college, university, or graduate school. You can be rest assurred that through our service we will write the best admission essay for you.
Our academic writers and editors make the necessary changes to your paper so that it is polished. We also format your document by correctly quoting the sources and creating reference lists in the formats APA, Harvard, MLA, Chicago / Turabian.
If you think your paper could be improved, you can request a review. In this case, your paper will be checked by the writer or assigned to an editor. You can use this option as many times as you see fit. This is free because we want you to be completely satisfied with the service offered.