52. (Change in investment assumption) Lenin’s Linen provides laundered items to various commercial and service establishments in a large metropolitan city.

Lenin’s is scheduled to acquire new cleaning equipment in mid-2001 that should provide some operating efficiencies. The new equipment would enable Lenin’s to increase the volume of laundry it handles without any increase in labor costs.

In addition, the estimated maintenance costs in terms of pounds of laundry would be reduced slightly with the new equipment.

The new equipment was justified on the basis not only of reduced cost but also of expected increase in demand starting in late 2001. However, since the original forecast was prepared, several potential new customers have either delayed or discontinued their own expansion plans in the market area that is serviced by Lenin’s. The most recent forecast indicates that no great increase in demand can be expected until late 2002 or early 2003.

Identify and explain the factors that Lenin’s should consider in deciding whether to delay the investment in the new cleaning equipment. In the presentation of your response, distinguish between those factors that tend to indicate that the investment should be made as scheduled versus those that tend to indicate that the investment should be delayed. (CMA adapted)