Imagine you are a representative of management in the company you have selected
ID: 2761086 • Letter: I
Question
Imagine you are a representative of management in the company you have selected for your Week Six assignment (my paper is on CVS pharmacy/retail store) and you must make a capital budgeting decision. The decision is to implement a new computer network system to decrease the time between customer order and delivery. The cost will be 10% of last year’s profits. You are charged with describing the important considerations in the decision-making process to upper management. In your response, be sure to include the following:
A description of the important factors, in addition to quantitative factors, that were considered when making this capital budgeting decision.
An explanation of how these factors are significant to the company.
A summary of how you will determine the criteria to rank capital budgeting decisions and whether some criteria are more important than others.
A calculation of the proposed return on investment based on criteria you select and justification for that ROI.
Explanation / Answer
The important factors that were considered when making a capital budgeting decision are Company Culture,Product/Service Quality,Environmental Concerns and Ethical Considerations.Quantitaive factors are capital investments -- whether large, one-time purchases of facilities or productive equipment, investments in labor or assets purchased for profitable appreciation.
These factors are significant to the company in following manner :
Cultural considerations can be expected to come into play more heavily with physical productive resources than financial investments.
The quality of capital resources can directly affect the quality of goods or services. This is one area in which quantitative and qualitative factors can be at odds, as the least expensive options in the marketplace can generally be expected to yield the lowest quality.
Capital investments can have varying degrees of impact on the environment, and the more financially appealing options frequently have greater impacts than costlier options. Because of this, the quantitative factor of price can be at odds with the qualitative factor of environmental responsibility.
Ethical concerns can inject a host of qualitative considerations into a capital-investment decision.
The Proposed criteria for ROI is Net Present value of the capital investment if NPV is neagtive we should not for that project and where it comes positive we sholud go for it.
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