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Business Decision Analysis Project - Essay Example

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Mr James Wiesman is a professional engineer ready to venture into a new business of supplying construction material that will reduce the costs and time taken for construction. However, he faces two main problems. Firstly, he has to make a decision to either sub-out the…
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Business Decision Analysis Project
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Download file to see previous pages This analysis report will help decide whether James starting a new business will generate enough income to cater for the income that James will forgo so as to run the new business. Also, the report will give him sound financial advice for his decision-making process. We shall also use US Code 1031- tax free exchange in the report. The rule states that a company can defer capital gain taxes if he sells property to reinvest in another one.
Mr James Wiesman faces the major challenge of deciding whether or not he should buy/lease the equipment needed to manufacture the products or buy them from another company. Currently, Mr James owns a construction patent of a process that reduces the cost of production tremendously. The patent is highly lucrative, which has led to Mr James to sign contracts with the U.S. government to supply the products to the navy and army for Barrack constructions. The facts of this problem are that the cost of producing the products himself will attribute for 60% of his total costs (Glen& Howard, 91). In addition, the cost of production of the materials will be a third of buying it from another company. It is evident that the cost of buying the product from another company will be much higher than the former. Based on the mentioned facts, it is advisable that Mr James Wiesman buys/leases the equipment needed for production.
Buying or leasing equipment will require Mr James to open his own firm. The initial costs of production include the purchase of land, building costs and the working capital that sum up to over2,120,000 $. Mr James has to decide the sources for his financing to make this decision. He has two options to choose. Firstly, Mr John Money Bag is willing to give him 2,000,000$ for controlling interest of the company as well as semi-active management participation. Secondly, Mr James can sell off some of his assets to raise the funds necessary for production. Mr James is ...Download file to see next pagesRead More
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