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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