MBA-FPX5010_VitosGarciaJavierAndres_Assessment4_1

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EDP University of Puerto Rico *

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BA 2321

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Business

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Feb 20, 2024

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docx

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1 Expansion Recommendation (Javier A Vitos Garcia) Capella University Daniela Pavel Nov 12, 2023 MBA-FPX5010
Expansion Recommendation 2 Instruction – Evaluation Scenario Ambitious food company ZXY is putting its green thumbs to work, aiming to sprout a new plant and expand its delicious empire. Get ready to dig deep into those pockets, as this expansion invites you to splash out $7,000,000 on some shiny new gear. Don't worry, though, because these trusty machines will serve you faithfully for a solid decade, and if luck is on your side, you'll be able to get a whopping $1,000,000 back when it's time to say goodbye to them. They intend to rent the premises. ZXY wants a titanic 12% ROI, as if they were trying to squeeze blood from a stone! Provide a recommendation on the investment decision. Financial Information’s Analysis By estimating ten times the expected useful life of the equipment, ZYX generates an expected profit and loss account and an expected overflow account. From the revised statements, the figures have been recorded gradually, but they are insufficient to finance the desired expansion expenses. A new product may be produced until a fourth substitute is made because the expected return does not reach the 12% required for the success of the investment. The annual profit from the first three investments, which had a 12% return on the initial $7 million, remained constant at $840,000. An example: A product with the new product has a projected cash flow deficit of $73,357. The company expects $615,998 in positive cash flow under the fourth option but remains in debt due to lost wages. Whether that revenue portal is still active for the company, the company may remain in the red until halfway through the device's projected lifespan, specifically the fourth round of the fifth day. After Wednesday, the net profit increased steadily. Product B must be produced four times for the company to achieve positive net income.
Expansion Recommendation 3 Your net income for this period will be $615,998, as shown below. The company forecast growth for the fourth consecutive year: product growth. If the company is unsuccessful initially, it will probably be successful in 4 or 5 years. The cash flows of $6,947,667.83, resulting from a rate of 12% and a useful life of ten years, are less than the initial investment of $7,000,000. The expansion currently has a negative NPV of - $52,332.17. With a 10% discount percentage, the NPV would be $8,023,305.91, exceeding the initial investment and producing a profit. After ten years of production, the approximate financial value of products A and B, as assessed by the company's financial statements, would exceed $56 million—projected gross profit: $33,164,007; net profit: $17,339,027. Screenshot from Company’s Financial Statement:
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