Discuss the difference between top-down and bottom-up changes
What will be an ideal response?
Top-down change is implemented by managers at a high level in the organization. The result of radical organizational restructuring and reengineering is top-down change. Managers high up in the organization decide to make a change, realizing full well that it will reverberate at all organizational levels. The managers choose to manage and solve problems as they arise at the divisional, functional, or individual levels.
Bottom-up change is implemented by employees at low levels in the organization and gradually rises until it is felt throughout the organization. By reducing the uncertainty that employees experience, bottom-up change facilitates unfreezing and increases the likelihood that employees will retain the new behaviors they learn during the change process. In general, bottom-up change is easier to implement than top-down change because it provokes less resistance. Organizations that have the time to engage in bottom-up change are generally well-run organizations that pay attention to change, are used to change, and change often. Poorly run organizations, those that rarely change or postpone change until it is too late, are forced to engage in top-down change.
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The optimal subset of the six projects that Schoeman is considering consists of Projects:
The capital budgeting committee for Laroche Industries is meeting. Laroche is a North American conglomerate that has several divisions. One of these divisions, Laroche Livery, operates a large fleet of vans. Laroche’s management is evaluating whether it is optimal to operate new vans for two, three, or four years before replacing them. The managers have estimated the investment outlay, annual after-tax operating expenses, and after-tax salvage cash flows for each of the service lives. Because revenues and some operating costs are unaffected by the choice of service life, they were ignored in the analysis. Laroche Livery’s opportunity cost of funds is 10 percent. The following table gives the cash flows in thousands of Canadian dollars (C$). 20 Learning Outcomes, Summary Overview, and Problems part-i-02 13 January 2012; 10:13:22 Service Life Investment Year 1 Year 2 Year 3 Year 4 Salvage 2 years 40,000 12,000 15,000 20,000 3 years 40,000 12,000 15,000 20,000 17,000 4 years 40,000 12,000 15,000 20,000 25,000 12,000 Schoeman Products, another division of Laroche, has evaluated several investment projects and now must choose the subset of them that fits within its C$40 million capital budget. The outlays and NPVs for the six projects are given below. Schoeman cannot buy fractional projects, and must buy all or none of a project. The currency amounts are in millions of Canadian dollars. Project Outlay PV of Future Cash Flows NPV 1 31 44 13 2 15 21 6 3 12 16.5 4.5 4 10 13 3 5 8 11 3 66 8 2 Schoeman wants to determine which subset of the six projects is optimal. A final proposal comes from the division Society Services, which has an investment opportunity with a real option to invest further if conditions warrant. The crucial details are as follows: The original project: An outlay of C$190 million at time zero. Cash flows of C$40 million per year for Years 1–10 if demand is “high.” Cash flows of C$20 million per year for Years 1–10 if demand is “low.” Additional cash flows with the optional expansion project: An outlay of C$190 million at time one. Cash flows of C$40 million per year for Years 2–10 if demand is “high.” Cash flows of C$20 million per year for Years 2–10 if demand is “low.” Whether demand is “high” or “low” in Years 1–10 will be revealed during the first year. The probability of “high” demand is 0.50, and the probably of “low” demand is 0.50. The option to make the expansion investment depends on making the initial investment. If the initial investment is not made, the option to expand does not exist. The required rate of return is 10 percent. Society Services wants to evaluate its investment alternatives. The internal auditor for Laroche Industries has made several suggestions for improving capital budgeting processes at the company. The internal auditor’s suggestions are as follows: Chapter 2 Capital Budgeting 21 part-i-02 13 January 2012; 10:13:22 Suggestion 1. “In order to put all capital budgeting proposals on an equal footing, the projects should all use the risk-free rate for the required rate of return.” Suggestion 2. “Because you cannot exercise both of them, you should not permit a given project to have both an abandonment option and an expansion/ growth option.” Suggestion 3. “When rationing capital, it is better to choose the portfolio of investments that maximizes the company NPV than the portfolio that maximizes the company IRR.” Suggestion 4. “Project betas should be used for establishing the required rate of return whenever the project’s beta is different from the company’s beta. A. 1 and 5. B. 2, 3, and 4. C. 2, 4, 5, and 6.
In computer graphics, a template
A) is a tool for creating curves and geometric shapes. B) helps ensure an effective design, saves time, and makes decision making easier. C) is any kind of chart generated by a spreadsheet or illustration program. D) is a tool for creating classic architectural views. E) eliminates the need to add text to explain the visual.