Scandura (1999) employs LMX Theory in her exploration of the concept, “organizational justice.” What is meant by organizational justice? How and why is this an important part of the leader-follower relationship? Solution Organisational Justice: Justice is an important concern for organisations as well as employees operating in both formal and informal environment. There are four types of justice – Procedural, informational, distributive and interpersonal. Leader Member theory or LMX theory suggests a unique type of relationships developed with each subordinate, rather than same style dealing with members. Organisational justice gives the subordinate confidence to deal with different situations. The justice is deeply influenced by leader and should be taken in confidence of member..

1. Scanlin, Inc., is considering a project that will result in initial aftertax cash savings of $1.83
million at the end of the first year, and these savings will grow at a rate of 2 percent per year
indefinitely. The firm has a target debtequity ratio of .80, a cost of equity of 12.3 percent, and an
aftertax cost of debt of 5.1 percent. The cost-saving proposal is somewhat riskier than the usual
project the firm undertakes; management uses the subjective approach and applies an adjustment
factor of 1 percent to the cost of capital for such risky projects.
What is the maximum initial cost the company would be willing to pay for the project? (Enter
your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate
calculations and round your answer to the nearest whole dollar amount, e.g., 32.)
Scanlin, Inc., is considering a project that will result in initial aftertax cash savings of $1.83
million at the end of the first year, and these savings will grow at a rate of 2 percent per year
indefinitely. The firm has a target debtequity ratio of .80, a cost of equity of 12.3 percent, and an
aftertax cost of debt of 5.1 percent. The cost-saving proposal is somewhat riskier than the usual
project the firm undertakes; management uses the subjective approach and applies an adjustment
factor of 1 percent to the cost of capital for such risky projects.
Solution