Question
Cardiff Chemicals co. (family company) is considering the purchase of a new plant to produce a new chemical code-named X9. The plant is readily available
Cardiff Chemicals co. (family company) is considering the purchase of a new plant to produce a new chemical code-named X9. The plant is readily available and can be installed immediately at a cost of 160,000. The company has already spent 40,000 on researching and developing the new chemical. The best estimate of revenues and costs arising from the operation of the new plant are as follows:
Years 1 2 3 4 5 Selling price ( per unit) 100 120 120 100 94 Variable cost ( per unit) 50 50 40 30 40 Annual fixed costs (000)23 23 23 23 23 Sales volume (units) 800 1,000 1,200 1,000 1,000
(a.)Discuss the possible ways to finance buying the new machine. Please highlight advantages and disadvantages of these potential methods and which one you think is more relevant to Blue Sky Co, as a family firm. Please support your discussion with academic references
(b.) Discuss other potential factors (non-financial factors) that Blue Sky co. should take into consideration when taking this investment decision
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