LEARN MORE...

Expansion Recommendation Zxy Company

Content type

User Generated

Subject

Accounting

School

Capella University

Type

Homework

Uploaded By

758gevonf

Pages

Showing Page:

1/5

Running Head: EXPANSION RECOMMENDATION ZXY COMPANY 1

Expansion Recommendation ZYX Company

Name

Institution

Course

Date

Showing Page:

2/5

EXPANSION RECOMMENDATION ZXY COMPANY 2

Introduction

ZYX is a Company operating in the food production industry and is in the process of

pursuing an expansion plan by introducing new product lines. The company intends to rent a

new production plant to boost the expected increase in production volume once it implements the

expansion plan. To achieve this planned expansion, the company needs at least $7,000,000 that

will be spent in renting the equipment. The equipment that the company intends to rent has a

useful life of 10 years after which its salvage value will be $1,000,000. The Company anticipates

that the return on investment would be 12%. This paper will evaluate the financial statement of

the company to ascertain the inherent risk that the investments decision attracts before

recommending whether the expansion plan is feasible or not. The paper concludes with an

explanation of the significance of financial information to the decision-making process in this

case.

Analyze Financial Statements for Decision Support

The financial statement of the company shows that the forecasted revenue from product

A will continue to reduce over the next three years. However, the production of product B has a

positive forecast because its sales revenue will begin to result in an overall increase in the

company’s revenue after the first three years. This forecasted increase in profit will continue

until the final year which will result in combined revenue of $56,840,000 by the end of the 10

year (Alkaraan, 2020). The Company has forecasted that its projected cost of goods sold will be

$23,675,993 translating into a gross profit of $33,164,007 by the end of the 10

year. It is also

forecasted that the company will incur a cumulative total expense of $5,374,724. Apart from the

Cost of Goods Sold, the company has forecasted that its total depreciation will accrue to

$3,350,000 and corporation tax will amount to $7,100,255. At the end of the 10 years of

Showing Page:

3/5

End of Preview - Want to read all 5 pages?

Access Now

Unformatted Attachment Preview

Running Head: EXPANSION RECOMMENDATION ZXY COMPANY Expansion Recommendation ZYX Company Name Institution Course Date 1 EXPANSION RECOMMENDATION ZXY COMPANY 2 Introduction ZYX is a Company operating in the food production industry and is in the process of pursuing an expansion plan by introducing new product lines. The company intends to rent a new production plant to boost the expected increase in production volume once it implements the expansion plan. To achieve this planned expansion, the company needs at least $7,000,000 that will be spent in renting the equipment. The equipment that the company intends to rent has a useful life of 10 years after which its salvage value will be $1,000,000. The Company anticipates that the return on investment would be 12%. This paper will evaluate the financial statement of the company to ascertain the inherent risk that the investments decision attracts before recommending whether the expansion plan is feasible or not. The paper concludes with an explanation of the significance of financial information to the decision-making process in this case. Analyze Financial Statements for Decision Support The financial statement of the company shows that the forecasted revenue from product A will continue to reduce over the next three years. However, the production of product B has a positive forecast because its sales revenue will begin to result in an overall increase in the company’s revenue after the first three years. This forecasted ...
Purchase document to see full attachment

Tags: financial information investment risks Depreciation expense estimates of revenues expense line