Explaining the concepts of marginal analysis

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Reference no: EM133203217

Assignment:

Oil Company X is a large oil refinery which has been expanding and taking on new investment projects. Recently, they have considered building a pipeline that stretches across the United States, from Canada to New Orleans.

This particular process will generate high revenues, but also high costs. The expected profit generated from the initial investment after 10 years will be approximately 8%. Assume that stocks tend to average a return of approximately 10% over a 10 year period.

Recently, the CEO has faced backlash from the company Board who have asked specific questions concerning the recommendations put forth by the Cost Analysis Department. The Cost Analysis Department has indicated that the marginal analysis does not support the project. However, the Board feels that this would be a profitable project due to the massive revenues that would be generated. They have questions in relation to marginal analysis, and how it is undertaken. As a Cost Analyst, you have been asked to make a presentation to the Board.

Instructions

The head of the cost analysis department has asked you, a recent hire, to make a presentation to the board explaining your recommendation. You will provide the board with an introduction to marginal analysis used by the company when making investment decisions.

Your PowerPoint should include narration as you make your presentation to the Board.

Your presentation should justify your Department's recommendation not to undertake the project. This should include an explanation of the following terms and how they relate to the department's decision:

Opportunity Cost

Marginal Benefit

1. Marginal Cost

2. There are many free screen recording software/Webware options available (such as Screencast-O-Matic) to use in presenting your PowerPoint. Make sure that both your voiced narration and the PowerPoint slides are captured during your screen recording.

3. Pay attention to your audience. Remember that you are explaining the concepts of marginal analysis and opportunity cost to someone who may have no previous knowledge of economics.

Reference no: EM133203217

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