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Edmonds Manufacturing is located in the northwest region of the U . S . The company is experiencing tremendous growth in demand for its products.
Edmonds Manufacturing is located in the northwest region of the US The company is experiencing tremendous growth in demand for its products. Management has discussed the distribution channel as an impediment to the companys ability to keep up with growing demand. Manufacturing facilities have excess capacity to meet increasing orders, but the company will have difficulty getting the products to the customers. The supply chain distribution manager has suggested investing in a project which will enhance the storage area near the distribution centre. After some collaborative research by the accounting and finance departments, the company found that a new project will cost $ which will be financed with equity and cost of capital is Post tax cash flow is expected to be for years Distribution managers believe the new building will increase productivity to allow for additional sales of units each year. Currently the existing facility is able to generate a demand of units year Marketing managers estimate the demand for the companys product will increase units each year. Assume the company has another project in hand which yields similar benefits as mentioned in the above case study and has an expected return of with a SD of Should the company invest in the new project if the existing project has an expected return of with a SD of Analyse your answer.
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