The Dilemma at Day Pro

12 Comparison of Capital Budgeting Techniques The Dilemma at Day-Pro The Day-Pro Chemical Corporation, open in 1995, has managed to earn a consistently high locate of return on its investments. The secret of its success has been the strategic and well-timed development, manufacturing, and marketing of innovative products that have been used in discordant industries. Currently, the management of the company is considering the manufacture of a thermosetting rosin as packaging material for electronic products. The Companys Research and Development teams have come up with devil alternatives: an epoxy resin, which would have a lower startup cost, and a synthetic resin, which would cost more to produce initially unless would have greater economies of scale. At the initial consecrateation, the project leaders of both teams presented their cash flow projections and provided sufficient documentation in support of their proposals. However, since the products are mutually exclusive, the firm can scarcely fund one proposal.

Case 12 The Dilemma at Day-Pro 49 In effect to resolve this dilemma, Mike Matthews, the Assistant Treasurer, and a late(a) MBA from a prestigious mid-western university, has been assigned the task of analyzing the costs and benefits of the deuce proposals and presenting his findings to the advance of directors. Mike knows that this will be an uphill task, since the board members are not all on the same foliate when it comes to financial concepts. The Board has historically had a strong appreciation for using rates of return as its decision criteria. On occasions it has also used the payback period blast to decide between competing projects. However, Mike is convinced that the net present value (NPV) method is least flawed and when used decent will always add the most value to a companys wealth. After obtaining the cash flow projections for apiece project (see Tables 1 & 2), and crunching out the numbers, Mike realizes that the hill is sack to be steeper... If you want to get a full essay, order it on our website: Ordercustompaper.com

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