Question
You are leading a committee deciding which capital improvement project to fund in the factory. You have been directed by corporate management that when you
You are leading a committee deciding which capital improvement project to fund in the factory. You have been directed by corporate management that when you choose a project that you consider certain factors. The strategic plan is focused on improving productivity and quality, so the project you choose should focus on one of those areas. Management is willing to fund a project up to $1.5 million. There are three performance measures that will be used to select the project: payback period (lower is better), return on investment (higher is better), and impact index (higher is better). The committee decides to weight the performance measures: payback period - 4, return on investment - 7, and impact index - 9.
What is the objective of this decision making process?
Project | Focus | Cost ($) | Payback (Years) | ROI (%) | Impact Index |
A | Productivity | 950,000 | 2.0 | 15 | 7 |
B | Capacity | 500,000 | 1.5 | 24 | 8 |
C | Quality | 800,000 | 3.0 | 12 | 5 |
D | Productivity | 1,500,000 | 3.5 | 17 | 6 |
E | Quality | 1,600,000 | 1.5 | 17 | 8 |
F | Productivity | 1,750,000 | 2.0 | 21 | 4 |
A | Choose the lowest cost project. |
B | Choose the best capital project to fund. |
C | Choose the highest ROI project. |
D | Choose a factory site. |
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