Capital Budgeting Related Case Solution: Egret Printing
Capital Budgeting Case Egret Printing & Publishing Company
Instructor: Mr. Sabin Bikram Panta
Submitted By: Group 3
Shivshankar Yadav (12336)
9/3/2012
Theory and Case Background:
The term capital budgeting refers to the process of decision making by which firms evaluate the purchase of major fixed assets, including building, machineries, and equipment. Capital budgeting describes the firm’s formal planning process for the acquisition and investment of capital and results in capital budget that is the firm’s formal plan for the expenditure of money to purchase new fixed asset for expansion or replacement of business.
Egret printing and publishing company is a family owned company established by Jhon and Keith in 1956. Patrick Hill joined the firm in 1979 in accounting department. As being in this department he has responsibility for both internal and external financial decision. Egret is an all equity capital structured company. It was a success company specially, in printing business. It has also made a investment in a diversified business named local video text service. Over one half of the system’s subscribers pay for the video text service. Belford had identified four major investment proposals for his firm’s internal fund 1.5 million. The four projects are as follows:
Project A: Major Plant Expansion:
This project has been designed to alleviate the capacity problem by constructing a new wing on the main plant. This additional space would allow to hold a greater vriety of paper stock in inventory and to reposition its various processes for a more efficient work flow.
Project B: Alternative Plan for Plant Expansion
This project was an alternative of project A. it can be installed much more quickly and will allow Egret to take several major printing jobs in the next few years.
Project C: Purchase of New Press
This is a dependence project on A or B. so, the existence of this project don’t affect the future cash flow for project A or B. it is
Instructor: Mr. Sabin Bikram Panta
Submitted By: Group 3
Shivshankar Yadav (12336)
9/3/2012
Theory and Case Background:
The term capital budgeting refers to the process of decision making by which firms evaluate the purchase of major fixed assets, including building, machineries, and equipment. Capital budgeting describes the firm’s formal planning process for the acquisition and investment of capital and results in capital budget that is the firm’s formal plan for the expenditure of money to purchase new fixed asset for expansion or replacement of business.
Egret printing and publishing company is a family owned company established by Jhon and Keith in 1956. Patrick Hill joined the firm in 1979 in accounting department. As being in this department he has responsibility for both internal and external financial decision. Egret is an all equity capital structured company. It was a success company specially, in printing business. It has also made a investment in a diversified business named local video text service. Over one half of the system’s subscribers pay for the video text service. Belford had identified four major investment proposals for his firm’s internal fund 1.5 million. The four projects are as follows:
Project A: Major Plant Expansion:
This project has been designed to alleviate the capacity problem by constructing a new wing on the main plant. This additional space would allow to hold a greater vriety of paper stock in inventory and to reposition its various processes for a more efficient work flow.
Project B: Alternative Plan for Plant Expansion
This project was an alternative of project A. it can be installed much more quickly and will allow Egret to take several major printing jobs in the next few years.
Project C: Purchase of New Press
This is a dependence project on A or B. so, the existence of this project don’t affect the future cash flow for project A or B. it is