Posted: January 13th, 2016
Decisions involving capital expenditures often require managers to weight the costs and benefits of different options related to the same goal or project. For instance, deciding whether to replace, repair, or do nothing to existing equipment is a capital expenditure decision that involves calculations, projections, and deliberations. Managers must be able to quantitatively analyze different options for capital expenditures to make the best decisions for their organization.
For this Assignment, review the information in the scenario presented. You will utilize the information in this week’s resources and media to make a recommendation in regard to a capital expenditure.
Garrison Appliances, Inc.
Garrison Appliances, Inc. is considering expanding its international presence. It sells 25% of all the toaster ovens sold in the United States but only 3% of the toaster ovens sold outside of the United States. The organization believes that it can sell more of its product if it has a production facility located overseas. Estimates concerning two possible locations, Mumbai and Bangalore, India follow:
Possible Location |
Mumbai |
Bangalore |
---|---|---|
Initial cash outlay |
$5,000,000 |
$2,800,000 |
Useful life |
20 years |
20 years |
Net cash inflows excluding depreciation |
$1,100,000 |
$860,000 |
The cost of capital |
9% |
9% |
Tax rate |
40% |
40% |
The Assignment:
Note: Be sure to view the media for this week before starting this Assignment.
Submit your Application (both your Excel and Word files) by Day 7.
To submit your Assignment, do the following:
Your Application, due by Day 7, will typically be 4–6 paragraphs in length as a general expectation/estimate for each bullet point. Refer to the rubric for the Week 3 Application for grading elements and criteria. Your Instructor will use the rubric to assess your work.
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