Magic’s company peaked in relation to sales revenue in about 2011 and went on to experience a steady decline in turnover that was attributed to numerous causes, including a drop in tourism and infrastructure problems on the shore.
Hoping to revive the business in early on 2015, Magic’s owner considered his firm demanded an investment in fixed assets — especially, a big finisher that would increase capacity and reduce maintenance. The owner had to use the net present value method to determine whether the purchase would add value to the firm because the new machine needed a significant monetary investment.
Magic Timber and Steel Investment Evaluation with Net Present Value Case Study Solution
Learning Objective: The case has several objectives directed at enhancing pupil learning:
It provides a real world case of an organization that must make an important investment choice.
It has been designed as a repair-versus-replace decision as opposed to as an easy investment selection, so pupils get an understanding of the practice of making a selection between two alternative investments.
It requires pupils to think outside the stringent net present value evaluation and consider qualitative factors that may override the net present value determination.
It requires that their final decision is communicated by students through a brief report, therefore it is essential they understand what the analysis is telling them.
Publication Date: 04/21/2016
This is just an excerpt. This case is about Finance
