A small gain was generated by the resort property clearing job and the owner is assessing the prospects of bidding on similar land clearing projects in the region. The owner believes that the size constrains profitability for this particular line of business. He provides rationale that a larger truck and trailer would allow him to transport more goats to the job site each day, producing incremental sales. He also comprehends that a larger truck and trailer would lead to increased operating costs. The owner concludes that the investment needed to update the truck and trailer. He must then determine if costs and incremental sales associated with the bigger truck and trailer would justify the initial investment. This instance provides a realistic analysis of incremental revenues and costs in the context of capital budgeting. The (B) case may be utilized independently of the (A) instance in the event the professor wants to focus only on capital budgeting.
PUBLICATION DATE: December 13, 2011 PRODUCT #: W11569-PDF-ENG
This is just an excerpt. This case is about FINANCE & ACCOUNTING
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