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Management Accounting Case 2 Winter 2008

Management Accounting Case 2 Winter 2008 - MANAGEMENT 122...

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M ANAGEMENT 122 W INTER 2008 M ANAGEMENT A CCOUNTING D ANNY S. L ITT CASE ASSIGNMENT 2 March 2, 2008 Page | 1 Comparison of Capital Budgeting Techniques The DSL Chemical Corporation, established in 1995, has managed to earn a consistently high rate of return on its investments. The secret of its success has been the strategic and timely development, manufacturing and marketing of innovative products that have been used in various industries. Currently, the management of the Company is considering the manufacture of a thermosetting resin as packaging material for electronic products. The Company’s Research and Development teams have come up with two alternatives: an epoxy resin, which would have a lower startup cost, and a synthetic resin, which would cost more to produce initially but would have greater economies of scale. At the initial presentation, the project leaders of both teams presented their cash flow projections and provide sufficient documentation in support of their proposals. However, since the products are mutually exclusive, the firm can only fund one
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