Question:
Andy Vickers was reprimanded by the home office for recommending a pollution abatement project because the project did not meet the standard financial criterion of a 10 percent rate of return. However, Andy had concluded that the $60,000 piece of equipment was necessary to prevent small amounts of arsenic from seeping into the city's water system. No EPA warnings had been issued to the company.
a. Discuss the company requirement of a 10 percent rate of return on all projects.
b. What might be the ultimate consequence to Vickers' company if it fails to prevent arsenic seepage into the groundwater system?
c. How should (or can) Vickers justify the purchase of the equipment to the home office?