The marketing director of National Midland Mortgage has been arguing with senior
ID: 1212085 • Letter: T
Question
The marketing director of National Midland Mortgage has been arguing with senior management about building a $50 million publishing facility. Other managers worried aboutthe assumptions in the analysis that support the investment- an increse in the number of mortgages processed and a reduction in processing costs.
What if the mortgage market did not grow as expected?
Should National Midland invest in the publishing facility?
What assumptions might the marketing director have made to make the investment look worthwhile?
Explanation / Answer
If the mortagage market did not grow then the same rate of return would be expected from the mortagage. It could be a loss for the financial institutes who have to take the returns to itself. The National Midland should not invest more because it would increase the mortagage process. The assumptions which the marketing director must take to investment should include the loss and profits to be earned in future investment if any. There must be records of transactions made by the company so that future investments could be checked.
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