We have the next available information about a company that wants to make some changes in its
Question:
We have the next available information about a company that wants to make some changes in its operating activity. Its manager has asked us to make a feasibility analysis of the proposed modifications.
Company Little Shoes has equipment that is not working. The manager of the company is doubting two possible choices:
1. To sell the equipment. The money received, after tax, would be used to refund the loan on the Balance sheet. The remaining money would be invested in a short-term financial asset which would generate an annual return.
2. To keep the equipment in the company. In order to improve its operating activity, new investment is necessary:
To buy new equipment
To Offer a training course for employees
Operating data. New investments will increase operating incomes and expenses.
Financing. In addition, to use available cash in the balance sheet, the company will increase its shared capital with issue prime. It will have access to a capital grant and, it will ask for a bank loan.
Fundamentals of Cost Accounting
ISBN: 978-0077398194
3rd Edition
Authors: William Lanen, Shannon Anderson, Michael Maher