Explore the consequences of a poor forecast and check whether it is worth doing more homework.

Investment projects should never be selected through purely mechanical processes. Managers should ask questions about the positive net present value (NPV). Good managers realize that the forecasts behind NPV calculations are imperfect. Therefore, they explore the consequences of a poor forecast and check whether it is worth doing more homework. They use several different tools and analysis techniques to answer their “what-if” questions.

In addition, managers should consider the types of bias, both unintentional and intentional, that may enter into the capital budgeting analysis.  As part of this assignment, you will examine the potential motivation for unethical behavior by executives that may take place in the capital budgeting process and explain how biasing cash-flow estimates can work to the advantage of the executive who intentionally inserts such bias