Peregrine: The CNC Machine Decision
Please answer the following questions based on the Peregrine Group Case Study.
1. Without using any numbers, identify the strengths and weaknesses of the three options identified by French. Are there any other options French should consider?
2. Compute and compare the net present value and payback period of each option.
3. Make a recommendation for French.
4. Rounding to the nearest 1%, at what discount rate does leasing produce a higher net present value than paying cash?
Instructions:
Please make your initial post by 11:59 p.m. (EST) on Friday.
Respond to at least two (2) of your fellow-learners initial posts. It is important to stay engaged on a regular basis. In your initial post, refer to course material and outside sources, including references. Final posts should be completed by 11:59 p.m. (EST) on Monday.
Please see the Discussion Forum Rubric for further details as to how your discussion posts will be graded.
Related: (Solved) Module 2 Assignment – Using the Accounting Equation
Solution – Peregrine: The CNC Machine Decision
Option 1: Use cash to purchase a new CNC machine.
- Less reliance on a single machine reduces the risk of production disruptions due to malfunction.
- The corporation does not owe any future regular payments to third parties because it purchased the equipment with cash.
- The firm may raise output without affecting the present line.
- A new machine improves the company’s manufacturing capability and ensures continuity.
Weaknesses
- There is a possibility of the machine becoming obsolete. This may have a substantial impact on productivity and efficiency.
- The large cash investment necessary for this acquisition may cause financial difficulty for the organization initially.
- The acquisition leads to increased running expenditures. If the increased sales generated do not cover these expenditures, the company’s finances may suffer.
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