MHA FPX 5010 Assessment 4 Expansion Analysis
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Project Risks
The project’s apparent intermediate risk stems mostly from its reliance on a steady demand for goods in the market, which is an initial $7,000,000 investment. Among its main risks are:
- Market risk: This can happen when there are economic meltdowns or when customer tastes and preferences shift (Sitinjak et al., 2023).
- Regulatory risk: New FDA laws and other restrictions could result in pricing modifications (Mio et al., 2020).
- Operational risk: As production scales or quality control are lost to maintain at the facility, new difficulties could emerge (Komang Adi Kurniawan et al., 2021).
Supporting Criteria
The Depreciation Schedule (Appendix B) makes obvious one of the main factors causing expansion to be delayed. Even with the more advantageous depreciation technique, ZXY Corp. does not break even to recover equipment expenditures until the eighth (8th) year in this scenario, according to real data.Since depreciation would be difficult and unanticipated costs are likely to cause hardship, it would be prudent to postpone expansion for 12 to 24 months while ZXY Corp. builds up more cash reserves in order to reduce risk and efficiently increase the likelihood of success (Setyaningsih et al., 2021).
Furthermore, a thorough examination of the energy costs included in the projections shows that they are not feasible. The cost of plant utilities doubles in the third year and stays the same for the next seven years. The company’s ability to withstand yearly energy rises as a matter of routine is quite doubtful (Shahadat, 2024). Additionally, as equipment is used, its performance deteriorates, raising utility bills even more.
Although the product idea and concept are good, the funds are lagging behind. Adding cash reserves will offer this organization adequate tools to respond to growing electricity prices and other possible unforeseen expenses.
MHA FPX 5010 Assessment 4 Expansion Analysis
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Conclusion
ZXY Company has a strategic chance to improve its financial performance and market presence with the projected growth. The decision to invest in expansion is supported by financial projections and the company’s operational capabilities, notwithstanding current uncertainties. Constantly monitoring market trends and operational metrics will be essential to verifying the project’s long-term success.
References
Cordazzo, M., Bini, L., & Marzo, G. (2020). Does the EU Directive on non-financial information influence the value relevance of ESG disclosure? Italian evidence. Business Strategy and the Environment, 29(8). https://doi.org/10.1002/bse.2589
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