Who owns a goat herd had effectively leased some of his herd to obvious land in a nearby resort. The place land clearing job produced a little profit and today the dog owner is evaluating the prospects of putting in a bid on similar land clearing projects in the region. The dog owner thinks that profitability with this profession is restricted by how big the18 wheeler and trailer accustomed to transport the goats towards the job site. He reasons that the bigger truck and trailer would permit him to transport more goats towards the job site every day, producing incremental revenues. Also, he knows that a bigger truck and trailer would lead to elevated operating costs. The dog owner determines an investment required to upgrade the18 wheeler and trailer. He or she must then determine whether incremental revenues and charges connected using the bigger truck and trailer would justify the first investment. This case supplies a realistic analysis of incremental revenues and charges poor capital budgeting. The (B) case may be used individually from the (A) case when the professor desires to focus solely on capital budgeting.
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