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Budget Recommendation Paper

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Capital Budget Recommendation By Sara Hinton ACC543 Professor Gayle Mackay July 17, 2012

Located in Sonora Mexico is a furniture company owned by one Guillermo Navallez called Guillermo Furniture Company. The Guillermo Furniture Company has had quite the success since opening, however in the late nineteen nineties this success began to waiver. The reason for such a change in success for the Guillermo Furniture Company is due to globalization. Due to the automation embraced by the company’s competitors, which has caused a reduction in profit margins as well as raise production costs for the Guillermo Furniture Company, there has been significant decline in business. Mr. Navallez is now faced with a plethora of decisions that may or may not dramatically change the way in which the Guillermo Furniture Company is operated. The accountant that has been hired by the Guillermo Furniture Company has been assigned to analyze capital budget techniques that will help determine which course of action should be taken by Mr. Navallez. This has been accomplished by not only examining capital budget techniques but through extensive research in understanding business alternatives available to the Guillermo Furniture Company as well. There are different business alternatives available to Mr. Guillermo Navallez. Like many of his competitors, Mr. Navallez has the option of merging his business with that of a larger company or he may choose to improve his production with the use of technological advances. Through technology, such as the use of computerized cutting instruments that will improve the accuracy of the cuts and allows for less production time it would allow the Guillermo Furniture Company to increase profit and a low cost per piece. Another alternative is to form a partnership with a competitor not yet

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