Essays on Jacaranda Company - Cost of Capital Assumptions and Calculations, Cost and Benefits of the Projects Case Study

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The paper “ Jacaranda Company - Cost of Capital Assumptions and Calculations, Cost and Benefits of the Projects” is a forceful example of the case study on finance & accounting. Different projects have different costs and benefits attached to them. For the organization to make a decision in regard to accepting certain project decisions; project evaluation is very crucial to ensure that the decision made will be of great impact to the organization. Investing in projects without accessing their ability to benefit the organization results in loss hence impacting the smooth running of the organization.

Jacaranda Company has been evaluating its projects using traditional methods which have led to project failures in the organization. The report identified and analyzed three different alternative projects which Jacaranda company opts to invest in future for the better organization performance. In the analysis alternative of purchasing an automatic juice processing machine which costs $5million has been viable as it has a high rate of return and high positive net present value. The alternative of purchasing customized automatic juice processing plants which cost $2million had positive net present value though lower than the automatic plant.

The third alternative which was to purchase juice processing plants had a negative net present value and lowest internal rate of return of 17.55% Therefore it is the organization's mandate to invest in the project to enhance its performance. IntroductionBusiness success and growth depend mostly on the efficient utilization of the resources in the organization. Capital expenditure is deemed necessary for the organization as it is a very crucial element in business management. Expansion of existing equipment and plant in an organization could result in economic growth hence increased productivity in an organization.

As the business grows it is always necessary to invest in fixed assets to improve production volume hence proper anticipation of the project cash flows and benefits for a series of years is very crucial. Different machines which have been purchased in Jacaranda Company for the last five years have been wearing out strangely. Most of the machines are wearing out before the estimated period is over and even before the payback period (Jiang & Ruan, 2010, pp.

45-76).

References

Chandra, P. 2008. Financial Management: New-Delhi: McGraw-Hill

Ehrhardt, C. & Brigham F. 2009.Financial Management Theory and Practice: Ohio: Cengange learning.

Jiang, H & Ruan, J. 2010. Investment risk assessment on high tech projects based on analytic hierarchy process and BP neural network. Journal of networks, 5(4): 393-402.

Khan, M & Jain, P. 2007. Financial management: New-Delhi: McGraw-Hill.

Siegel, G. & Shim, K. 2008. Financial Management: New York: Barron’s education publisher.

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