An organization is considering investing in an employee training program. The organization's planners expect that this...

An organization is considering investing in an employee training program. The organization's planners expect that this training program, which would cost $5,000,000, will reduce manufacturing costs and increase the quality of the company's various products. How would you frame this decision in the capital budgeting context?

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Expert Solution

This is related to capital budgeting decision making in which there is a higher amount of cost involved and I will be trying to compare the the initial investment with present value of all the savings which will be made and present value of all the benefits which will accrue to the company in the long run and then if I am getting a positive net present value then I will be proceeding with the project and if I am getting a negative net present value, I am not going to accept this proposal.

Hence, it is all about comparison between the initial investment which is made and benefits and savings which will be accruing to the company and they will have to be discounted at the present value in order to determine whether to accept the project or not.

jeff jeffy answered 2 years ago

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