BLC Inc. is a medium-sized manufacturing company based in the UK. The company operates mainly in… 1 answer below »

BLC Inc. is a medium-sized manufacturing company based in the UK. The company operates mainly in the London area and is based in Peterborough. At a recent board meeting, the company decided to expand its activities, and to lease additional temporary premises in London in order to cope with additional demand.

In this unit, you will analyse data related to anticipated cash flows resulting from BLC’s expansion to either of two potential new premises. Your group will collaborate to make a recommendation.

To prepare for this Shared Activity:

§ Review the financial data below. The company has narrowed the choice to the following two alternatives, with the following cash flow information being available.

§ Use the following data in your analysis:

Year

Property 1
$(000s)

Property 2
$(000s)

0

(2,500)

(2,750)

1

1,000

900

2

500

700

3

600

800

4

1,000

600

5

900

600

Note 1: The company’s current cost of capital is 10%.
Note 2: Ignore taxation.

To complete this Shared Activity:

§ Post an explanation of the tools that you believe would help you to reach a decision. If you were a decision-maker in this organisation, which calculations and measures would you want at your disposal before making your choice? Are there other, non-financial factors that may play a role in your decision? Additionally, include your recommendation to the company which option it should take. Support your decision with an interpretation of any calculations you performed, as well as an explanation of any other factors you considered.

§ Respond to at least two colleagues’ postings who have a different recommendation, or who utilised different financial or non-financial factors in reaching a decision. Discuss these differences and argue for or against specific ideas that have been posted.