As GB's Chief Financial Officer (CFO), you are required to prepare a report addressing the

following questions:

1. Explain the usefulness of cash and accounting break-even points as management

tools. Based on the forecasted increase in sales, do Project A and Project B meet

the corresponding cash and accounting break-even points? Explain why.

2. Discuss the implications of the proposed relaxation of credit terms to customers

from 30 days to 60 days on GB's working capital management.

3. Explain the usefulness of simple Payback period, and Net Present Value (NPV) as

investment appraisal tools. Compute the simple Payback period and NPV for

Project A and Project B and discuss which Project is better and why. Use the

payback cut-off period of 2 years for the evaluation of the payback period, and

6% as the discount rate to calculate NPV. What other factors should GB consider

in selecting between Project A and Project B? Explain why.

4. Comment on GB's debt ratio and ROE and its trend over time. How should GB

finance the chosen project? Explain why using finance principles introduced in

this subject.

5. Based on the answers to Questions 1 through 4 above, make specific

recommendations to the Board. Include limitations of the analyses conducted.