The ability of ZXY to react to unanticipated events, which are frequently likely to occur, is the most significant risk connected with a possible expansion (Momani, 2016). ZXY’s reserves of disposable income will be extremely low until Product B is introduced in the third year, given their profit projections for the first three years of the anticipated expansion. Although it may be argued that weighted risk is necessary to achieve expansion; a thorough examination of the risk’s weight over the first three years is necessary (Gazzola et al., 2020).
The simple fact is that, in general, the straight line method of depreciation is higher than MACRS.After figuring out ZXY Company’s straight-line depreciation estimate (7,000,000 – 6,000,000/10 or $600,000), it may be concluded that the company’s net income will drop by about $600,000 a year (APPENDIX A).Small and medium-sized firms can deduct some expenses as they happen by using MACRS (Marshall, 2020). ZXY Corp. should employ the MACRS depreciation method now that the positive net present value has been determined (Obi-Anike et al., 2023).
It is advised that ZXY Corp think about delaying this expansion a little bit in order to build up more cash reserves, following a thorough review that takes into account empirical data and projections. It would be wise to take the next one to two years to build up cash reserves for more stability given the market’s current volatility, possible competitors, and the apparent incapacity to respond to unforeseen circumstances (Cordazzo et al., 2020).
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The project’s apparent intermediate risk stems mostly from its reliance on a steady demand for goods in the market, which is an initial $7,000,000 investment. Among its main risks are:
The Depreciation Schedule (Appendix B) makes obvious one of the main factors causing expansion to be delayed. Even with the more advantageous depreciation technique, ZXY Corp. does not break even to recover equipment expenditures until the eighth (8th) year in this scenario, according to real data.Since depreciation would be difficult and unanticipated costs are likely to cause hardship, it would be prudent to postpone expansion for 12 to 24 months while ZXY Corp. builds up more cash reserves in order to reduce risk and efficiently increase">
An examination of increasing production to include the acquisition of a second leased facility and the phase-in of two new products will be presented in this document. The equipment needed for the expansion will cost $7,000,000 and will depreciate to $1,000,000 over a ten-year period (Appendix A) . ZXY Corp. demands a minimum return on investment (ROI) of twelve (12) percent in order to be competitive. A recommendation about the viability of the aforementioned expansion investment will be made at the end of this analysis.
The balance sheet, income statement, and statement of cash flows, along with the projected income statement and projected statement of cash flows, were reviewed as the first phase. When examining the ZXY (Pro Forma) Financial Statement, the losses that transpired during the third year are the first thing that is seen. This loss is partially related to the dramatic increases in plant utilities and payroll expenses coupled with the preparations for the secondary product manufacturing and the WC/PR expense (Setyaningsih et al., 2021).
With a revenue creation of $56,840 over ten (10) years, the total indicates a steady rise in earnings. Additionally, the forecast shows that profits will rise throughout the accounting cycle (Revsine et al., 2021).
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The ability of ZXY to react to unanticipated events, which are frequently likely to occur, is the most significant risk connected with a possible expansion (Momani, 2016). ZXY’s reserves of disposable income will be extremely low until Product B is introduced in the third year, given their profit projections for the first three years of the anticipated expansion. Although it may be argued that weighted risk is necessary to achieve expansion; a thorough examination of the risk’s weight over the first three years is necessary (Gazzola et al., 2020).
The simple fact is that, in general, the straight line method of depreciation is higher than MACRS.After figuring out ZXY Company’s straight-line depreciation estimate (7,000,000 – 6,000,000/10 or $600,000), it may be concluded that the company’s net income will drop by about $600,000 a year (APPENDIX A).Small and medium-sized firms can deduct some expenses as they happen by using MACRS (Marshall, 2020). ZXY Corp. should employ the MACRS depreciation method now that the positive net present value has been determined (Obi-Anike et al., 2023).
It is advised that ZXY Corp think about delaying this expansion a little bit in order to build up more cash reserves, following a thorough review that takes into account empirical data and projections. It would be wise to take the next one to two years to build up cash reserves for more stability given the market’s current volatility, possible competitors, and the apparent incapacity to respond to unforeseen circumstances (Cordazzo et al., 2020).
For support with “MHA FPX 5010 Assessment 4: Expansion Analysis,” Do My Course is here to help.
The project’s apparent intermediate risk stems mostly from its reliance on a steady demand for goods in the market, which is an initial $7,000,000 investment. Among its main risks are:
The Depreciation Schedule (Appendix B) makes obvious one of the main factors causing expansion to be delayed. Even with the more advantageous depreciation technique, ZXY Corp. does not break even to recover equipment expenditures until the eighth (8th) year in this scenario, according to real data.Since depreciation would be difficult and unanticipated costs are likely to cause hardship, it would be prudent to postpone expansion for 12 to 24 months while ZXY Corp. builds up more cash reserves in order to reduce risk and efficiently increase
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