Regal Cars Ltd. has been manufacturing exotic automobiles for more than 50 years. It has always prided itself on its top-quality products and high levels of customer satisfaction. All Regal Cars are hand-built to the purchasers’ individual specifications. In the past year, the popularity of Regal Cars has increased dramatically following a promotional campaign in which Regal provided complimentary cars to star members of the local NHL team. To meet the increasing demand, Mark Quaid, the president and largest shareholder of Regal Cars, is considering partially automating the production line.
Required:
Prepare a memo to Mark Quaid discussing how each of these options would affect the company’s financial statements. You should also include in your memo any other pertinent observations that could influence the financing decision he has to make.