Case study on Wilson Construction

Case study on Wilson Construction Essay example
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Finance & Accounting
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NPV NEW CRANE Year Purchase Price Running Costs Old Crane Sales Income Net Cash Flow Now -345,000 5000 -340,000 1 -60,000 40000 -20,000 2 -60,000 40000 -20,000 3 -60,000 40000 -20,000 4 -60,000 40000 -20,000 5 -60,000 40000 -20,000 6 -60,000 30,000 -30,000 7 -60,000 30,000 -30,000 8 -60,000 30,000 -30,000 9 -60,000 30,000 -30,000 10 -60,000 30,000 -30,000 ($13,677.21) Option B 1 -40,000 -40,000 - 0 -80,000 2 -40,000 0 -40,000 3 -40,000 0 -40,000 4 -40,000 0 -40,000 5 -125,000 -40,000 1000 0 -164,000 6 -60,000 30,000 -30,000 7 -60,000 30,000 -30,000 8 -60,000 30,000 -30,000 9 -60,000 30,000 -30,000 10 -60,000 30,000 -30,000 The second option looks more feasible given the current situation…

Introduction

The best option for the company is trying to increase its revenue base in order to improve the situation. Just having two or three projects supporting such a large purchase is not feasible and hence the company should market more often to attract more customers. In case these are two exhaustive options, the company should clearly select the option b because it is yielding a lower negative number and hence if the company wants to save its position it should try to adopt the option b. Money rates of returns do not reflect the time value of money. All economies face the phenomenon that the purchasing power of money constantly falls with the passage of time. Hence, inflation is needed to be taken into account in order to arrive at the real rate of return or rate of returns that are adjusted against inflation. ...
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