Captial Budget Recommendations


Capital Budget Recommendations
Jessica Weber
ACC 543
February 21, 2011
Sandria Stephenson

Capital Budget Recommendations
With the business world constantly changing and growing, all businesses have to expand and grow or risk failure. Guillermo Furniture, owned by Guillermo Navallez, is located in the beautiful vacation spot of Sonora, Mexico. The company is also one of North America’s largest furniture manufacturers because it is located near a good supply of timber that the company uses to make their many different tables and chares. In order for Guillermo Navaliez to continue to have a profitable business in the future, he best options is to consider the Present Value (PV), Net Present Value (NPV), and the Internal Rate of Return (IRR) to see the best options that are available for the his company’s future.
When Guillermo Navaliez first started his company, his passion was to create variety of tables and chairs that use the good supply of timber from the local area around Sonora.   However, in the late 1990s the economy went through a growth sprit. Tourism took over because of the beautiful view, inexpensive housing, the addition of an airport, and the new companies moving in which used new technology. This brought many complications for Guillermo’s Furniture Company. Since he was using his own hands to create his product for the uniqueness of his product, but this became an issue for competition with the new companies that moved in. The new companies use computer controlled laser lathes to create precise cuts and seem to be less cost-effective.
The Present Value (PV) is, “an Excel spreadsheet offers a variety of financial functions, one of which converts a future value annuity into its present value equivalent.   This present value function uses the syntax PV(rate, nper, pmt) in which rate is the desired rate of return, nper is the number of periods, and pmt is the amount of the payment (periodic cash...