Leedon Linen Supply Company provides laundered items to various commercial and service establishments in a large city. The company is scheduled to acquire some new cleaning equipment in the middle of the year 20A, which will enable the company to increase the volume of laundry it handles without any increase in labor costs. In addition, the estimated maintenance costs in terms of pounds of laundry processed will be reduced slightly.
The new equipment is justified not only on the basis of reduced cost but also on the basis of expected increase in demand starting in late 20A. However, since the original forecast was prepared, several potential new customers have either delayed or discontinued their own expansion plans, and the most recent forecast shows no large increase in demand until late 20B or early 20C.
Required:
Identify and explain factors that tend to indicate whether the investment should be made as scheduled or delayed.