Review the anthony orchard case study in unit resources

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Reference no: EM13338083 , Length: 1200 words

Financial Management 

It is analysed projected financial data and assessed its value to making a physical expansion decision. As you have heard in the media presentation from CFO Mary Scott, Anthony''s Orchard is faced with another type of expansion decision. CEO Bob Frost is eager to expand the product line to include apple juice. 

Of course, a decision to expand a product line has very many variables. In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice). You also will investigate the value of a number of financial measurements. Ultimately, you will develop a recommendation for the company, and this analysis will help you to support that recommendation. 

To prepare for this Individual Assignment: 

Review the Anthony''s Orchard case study in the unit resources. 

Consider the following: 

The company, according to Anthony''s Orchard Strategic Plan, is hoping to purchase an apple press in order to start a new line of prepared apple products-apple juice. 

The company estimates this new product offering will generate an additional $95,000 net income per year and estimated cash flows of $90,000 per year. The cost of the apple press will be $950,000 and this expenditure, as shown in the budgeted cash flow statement, is expected to take place in the fourth quarter of 2012. 

The apple press is expected to have a seven-year life and no salvage value. 

The company''s revenue goal for 2015 is $25 million. 

The company requires a 10% return on investment for new capital investments and the company uses a cost of capital of 8%. 

Assume a minimum 12% gross margin on revenue. 

Answer the following: 

Do you think the company''s revenue goal of $25 million by 2015 is realistic? 

Explain how purchase of the apple press might affect the company''s revenue goals. Based on this information, explain whether Anthony''s Orchard should invest in the apple press. Support your response with relevant information provided in the case study, the previous year''s financials for 2010, the current year''s financials for 2011 and the budgeted year''s financials for 2012. 

Draft budgeted financial statements from 2012 to 2015 under both options that provide a realistic assessment of expected revenues and costs, and explain how you have arrived at these budgeted figures.

Attachment:- Anthony-Orchard-case-study-for-03-ind-part.doc

Reference no: EM13338083

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