10-2 Scenario Analysis (Printing Equipment)

10-2 Scenario Analysis (Printing Equipment) - QSO-510...

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QSO-510 Professor: A. Duhon 10-2 Scenario Analysis (Printing Equipment) The owner of a small printing company is considering the purchase of additional printing equipment to expand her business. If the owner expands the business and sales are high, projected profits (minus the cost of the equipment) should be $90,000; if sales are low, projected profits should be $40,000. If the equipment is not purchased, projected profits should be $70,000 if sales are high and $50,000 if sales are low. Projected Profits In case of High Sales In case of Low Sales Equipment Purchased $90,000 $40,000 Equipment not Purchased $70,000 $50,000 1. Are there options other than the purchase of additional equipment that should be considered in making the decision to expand the business? Other than the purchase of additional equipment, the business owner should also consider the demand for her products / services. The purchase of additional equipment gives her the capabilities of handling increased sales. This does not mean that having the capabilities will translate into increased revenue. She needs to consider if the probability
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