Question

Bramer Corporation’s controller, Mara, was asked to prepare a capital investment analysis for a robot-guided aluminum window machine. This machine would automate the entire window-casing manufacturing line. Mara has just returned from an international seminar on qualitative inputs into the capital investment decision and the value chain. She is eager to incorporate these new ideas into the analysis. In addition to the normal net present value analysis (which produced a significant negative result), Mara factored in figures for customer satisfaction, scrap reduction, reduced inventory needs, and reputation for quality.

With the additional information included, the analysis produced a positive result for the investment. Do you think these other factors should be included in Mara’s analysis? Elaborate on why or why not.

Answer 1

solution :

I trust the extra factors ought not be included.

A NPV examination is a projection of aggregate of expected future money inflows over money outpourings, and it gives the dollar measure of net income in limited (time-weighted) terms. There without anyone else's input a component of vulnerability is available since the investigation is absed on anticipated information as it were. On the off chance that, furthermore, we incorporate the non-money related appraisals which are frequently emotional and subject to conclusions or controls, the vulnerability factor extends and toward the end, there might be a bigger variety between real outcome and NPV-anticipated outcome. In this manner, I don't concur with Mara's methodology.