Posted: February 19th, 2015

Capital Budgeting

Paper, Order, or Assignment Requirements

Futronics Inc is a $2 billion firm that sells communication services. Founded in 1937, Futronics has provided consumer products, as well as government systems and services for well over half a century. Due to a sharp increase in competition, flattened sales, and external economic conditions, Futronics is implementing a corporate overhead reduction program. The proposal is to replace the companys central office stores with outside vendors. The investment will cost $1,000.000 and yield incremental cash flows of $450,000 in year one(1), $350,000 in year two(2), $300,000 in year three (3) and $250,000 in year four(4). There is no salvage value of the asset, and the firm has a cost of capital of 8%.
-Calculate the net present value, internal rate of return, and simple payback. Next, determine the effect that each of the three(3) values will have on the company.-Explain one to two(1-2) investment gains that the company could achieve by outsourcing the central office functions. Focus on the companys potential to reduce overhead and still maintain or even improve the quality of its products,-Discuss one(1)capital budgeting method that would be most effective for the company. Next discuss one(1)capital budgeting method that would have the least value for the company as compared to others.