Description Instructions: Expansion Recommendation PRINT Prepare either a 3-4 page report or a 12-s ...
Description Instructions: Expansion Recommendation PRINT Prepare either a 3-4 page report or a 12-slide presentation in which you analyze financial information and risks associated with an investment to expand an organization and make a recommendation on whether or not to invest in expansion.Introduction This portfolio work project will allow you to review information and risks associated with an investment to expand an organization. As this information will be shared broadly across the organization, you will have a choice in your final deliverable audience and will organize your deliverable to meet the needs of that audience.Scenario ZXY Company is a food product company. ZXY is considering expanding to two new products and a second production facility. The food products are staples with steady demands. The proposed expansion will require an investment of $7,000,000 for equipment with an assumed ten-year life, after which all equipment and other assets can be sold for an estimated $1,000,000. They will be renting the facility. ZXY requires a 12 percent return on investments. You have been asked to recommend whether or not to make the investment.Your Role You are an accounting manager. Your boss has asked you to review and provide a recommendation on the expansion based on information that has been provided.Requirements In preparing and supporting your recommendation to either make the investment or not, include the following items as part of your analysis: Analysis of financial information. Identification of risks associated with the investment. Consider: How risky the project appears. How far off your estimates of revenues and expenses can be before your decision would change. The difference if the company were to use a straight line versus a MACRS depreciation. Recommendation for a course of action. Explanation of criteria supporting your recommendation. Financial Information As part of your analysis you might find that additional information from marketing, accounting, or finance would be useful in making an informed and well-supported recommendation. In a real workplace setting you would have the ability to ask for that information. However, for the purposes of this assessment, you can make assumptions about the values of that data or ratios in support of your recommendation.Accounting worked with the marketing group to create the ZXY Company Financial Statements spreadsheet for the new products business and the new facility.Notes about the financial information: The expense line labeled SQF FDA Mandates refers to the costs of complying with Food and Drug Administration requirements. Depreciation expense is calculated using 7-year life modified accelerated cost recovery system (MACRS). Deliverable Format Depending on the audience you choose to address, use one of the following options: Report for a mid-management audience. Prepare a 3–4 page report detailing your recommendation and the information you used to make your recommendation. Presentation for top leadership. Prepare a presentation of at least 12 slides detailing your recommendation and the information you used to make your recommendation. This paper is coming back at 48 percent another student paper please revise I need this back tomorrow. MBA-FPX5010_007626_1_1221_OEE_01 - MBA-FPX5010 - WINTER 2022 - SECTION 01SafeAssign Draft Review on Tue, Jan 25 2022, 9:19 PM 48% highest matchSubmission ID: e1237dd0-8d5d-465d-b756-ded008556e11MBA 5010 UNIT 4.docxWord Count: 916Attachment ID: 515302739748%Citations (4/4)1Another student's paper2https://writerswizard.com/2019/09/20/financial-statement/3Another student's paper4Another student's paper1Expansion RecommendationCapella UniversityMBA 50101 1/26/2022Introduction The food production firm called ZXY Company are considering a second manufacturing site and the addition of two more items are on the table for ZXY. There will always be a need for the food goods in question. 2 After a ten-year life, all assets and equipment may be sold for a total of $1,000,000, which is the projected cost of the planned expansion. 3 The facilities will be rented out to them. Investing in ZXY demands a return of 12 percent. 3 In the end, I will decide on whether or not to invest in the ZXY Company after analyzing its financial accounts.There are several factors to examine before proposing that the firm make the expenditure to expand to two additional products and construct a second manufacturing site. The hazards of the project, the correctness of income, cost predictions, and the impact on the project's valuation of adopting a straight-line vs. MACRS depreciation are a few things to take into account. Overall, I believe the ZXY Company should go through with its projected expansion plans to include two additional items and the opening of a second manufacturing site. This is my recommendation.Project Evaluation The ZXY Company is considering two new items for an investment of $7,000,000, including the construction of a second production facility. The addition of two new goods to the product range should be considered initially (Accardo, 2019). 3 The final product, which brought in $900,000 in sales in Year 4, was discovered when reviewing the company's financial documents. If the company's past product additions are any indication, adding two additional goods will more than quadruple its revenue. The products will be able to be produced at the second location. Sales will increase as a result of ZXY Company's increased efficiency. Over a decade, the firm should provide a return on investment of at least 12 percent.3 Risks I discovered that the first three years of adding new goods to the ZXY Firm Financial Statements would be the riskiest since they would not be lucrative for the company until year four. This is shown in Figure 1.3 Since the ZXY Company is significantly reliant on this year to recoup from its massive debt incurred in developing Product A in years 1 through 3, year four would be a hazardous year. As exhibited in Figure 2, the corporation would be taking a significant risk if they waited until year 4 to recover.Recommendation In light of the expected annual revenue, I believe the corporation should proceed with the recommended strategy. 4 Investors should keep in mind that it will take four years to earn a profit by extending its product lines into two new goods and constructing a new manufacturing facility. However, even though this is the most significant risk, the corporation is prepared to make up for this negative valuation income in year four when the second product is launched since it has been thoroughly recorded (Agustin, 2021). 3 In my opinion, we should have all the kinks sorted out of the new manufacturing site by year four. As a possible factor in their financial accounts, the corporation may have considered this. Before I would propose abandoning the expected plans, I would estimate that income and spending forecasts were at least $1,000,000 short.3 There are many other types of "MACRS depreciation schedules," but the "double declining balance (DDB) technique" is the most often referred to as a version of it. As a general rule, accelerated amortization schedules enable owners to reclaim more depreciation expenditure earlier in the accumulated depreciation life and less later in the accumulated depreciation life than straight-line retirement.3 The straight-line method would allow the corporation to receive the same deduction on their taxes "year after year, across the asset's useful life" if they were to adopt MACRS depreciation. An asset's cost base divided by its usable life is the exclusion amount (Accardo, 2019). The asset's value declines along a straight line on a graph, thus the term "downward slope." While the default MACRS technique offers you a larger tax deduction in the early years of the asset's useful life, it gives you a lower tax benefit as the asset's useful life comes to a close.Conclusion When contemplating the expenditure required expanding two new products and constructing a second manufacturing facility, there are quite a few elements to consider before recommending that the firm undertake this investment. Some of the factors include the project's risks, the accuracy of forecasts of revenues and costs, and how the difference if the firm were to employ a straight-line vs. a MACRS depreciation, would affect the value of the project. 3 All things considered, I would recommend that the ZXY Company moves forward with the planned strategy to extend its product range to include two additional goods and the construction of a second manufacturing facility.References
