DECK ROMANIA CASE ANALYSES 2

1190 Words Dec 21st, 2014 5 Pages
Student #: 1480510

Introduction
Capital budgeting is the most important management tool that enables managers of the organization to select the investment option that yields comprehensive cash flows and rate of return. For managers availability of capital whether in form of debt or equity is very limited and thus it become imperative for them to invest their limited and most important resource in perfect option that could prove to beneficial for the organization in the long run (Hickman et al, 2013). However, while using capital budgeting tool managers must understand its quantitative and qualitative considerations that are discussed below.
Independent project If an organization decides to invest in an independent
…show more content…
Have Romanian operations to global standards
3. At the time Romania joins EU, it will be able to supply it members with the given product with zero tariffs

Question 2: What do you see as alternative approaches to resolving Deck’s dilemma? Use your financial model and analyses (plural) to compare and contrast these alternatives.
a. Buy out the JV completely then invest $8.5 Million
i. Buying out JV will cost $100,00 of capital investment in the year 2006. It will nearly double cash flow to deck.
b. Invest $500,000 and let JV run independent
i. This is and existing successful model , therefore with minimal investment we can continue service the customer.
c. Sell JV to the partner while create a sourcing contact
i. By creating a sourcing contract with the JV partner, one will minimize the risk of financial lose. Example: If there is a change in Renaults production goals. ii. If you sell the JV to the partner, then they will be asble to keeo up the quality as well as the production goals.

Question 3: What is your final recommendation – and why?

a. I recommend that we invest $500,000 and let JV run independentlyas it was. Reason being is because 1. It is a minimul investment of only $500,000 vs. an investment of $8.5 million to create a gold standard of manufacturing facility and have the clients order volume not meet projections. In other words “why fix what’s not broken”.

References

More about DECK ROMANIA CASE ANALYSES 2

Open Document