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Capital Budgeting Theory on Purchase of New Apple Press

Capital Budgeting Methods

Managers make some of the most important decisions during the capital budgeting process. During this process, it is crucial that management use accurate methods to maximize the resources of the organization.

Using data from the Anthony's Orchards website, draft a memo to the chief financial officer (CFO) of the company defending whether the company should or should not purchase an apple press to make apple juice for Anthony's Orchards fruit production facility. Does it make sense to add this piece of equipment now or postpone the purchase? As part of your response, calculate the ROI/ARR (accounting rate of return), payback, and IRR methods. Also, determine which method is most appropriate for making this decision and defend your choice.

Your memo should reflect the application of the material presented this week as well as anything from previous weeks and Required and/or Optional Resources.

A description of your recommendation, a rationale for why it is important, and a description of the consequences of not following the recommendation should be included in the memo.

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Anthony's Orchard


To: [Name]
Chief Financial Officer
From: [Name]
Date: September 14, 2011
Subject: Decision on whether to purchase the apple press or now

The importance of capital budgeting can never be underscored enough in organizations more so in Anthony's Orchard where maintaining overall company competitiveness is paramount amidst restricted availability of funds for capital ...

Solution Summary

Capital budgeting theory on purchase of New Apple Press are examined.