Question

Assume that the low-calorie frozen, microwavable food company from Assignments 1 and 2 wants to expand, and has to make some long-term capital budgeting decisions. The company is currently facing increases in the costs of major ingredients.

4. Examine the major complexities that would arise under expansion via capital projects. Propose key actions that the company could take in order to prevent or address these complexities.

Answer 1

The low calorie frozen,microwabale food campany is categorized under monopolistic market structure,as there are not much of such kind of company and the items which they present in front of the customers have some or the other unique feature so as to capture a lot of market segment.

While taking any financial decision whether the expansion of business or any other decision ,every organization think twice because the decision taken out may or may not result in profit.But the deceision is taking in such a manner that should be worth profitable.  

In this case the company if facing increase in the cost of major ingredients which will probably result in increase in the price of the items.The company has to take some long -term capital budgeting decision .There are some complexities in this regard.These may be:

• The capital return on the investement.
• Profitabilty parameter
• Availability of new funds  

These complexities may be tackled by taking right decision at the right time.The company may issue shares in the market in order to raise funds.