Introduction
According to one author, to gain an advantage, an organization relies on a goal-driven strategic-management process to analyze its current capabilities and its operating environment, identify long-term threats and opportunities, and marshal the company’s resources to address them. Strategic management maintains the alignment of a company’s activities and resources with its vision, mission and strategy to improve financial and operating performance. It provides a means to convert a strategic plan to a framework that provides feedback for decisions and actions and allows the strategic plan to evolve as a company’s operating environment, objectives and operating requirements change (Nordmeyer, n.d.). The first step of the strategic management process is strategic planning, which requires your company to develop a vision and mission, identify priorities and develop an action plan (Nordmeyer, n.d.). The manager’s role in this process will be the focus of this unit’s discussion question.
This discussion requires you to explain the techniques used in capital budgeting. Capital budgeting is a multi-step process businesses use to determine how worthwhile a project or investment will be (The 5, n.d.). We often use it to determine if we should expand the business or invest in a piece of equipment (The 5, n.d.). According to one author, there are five steps to this process: 1) identify and evaluate potential opportunities; 2) estimate operating and implementation costs; 3) estimate cash flow or benefit; 4) assess risk; and 5) implement (The 5, n.d.). We will use this process to analyze and rank proposed projects (Overview, 2017).
Directions
You are the CFO of SouthWind Hospital. It is part of the BigValley Health System, a for-profit system. It is located in the mid-west. The system has 4 acute hospitals in total. The system currently has one centralized media center. This department is responsible for making multiple copies for projects, posters, presentations, etc. It also produces the media material for the system. The center recreates medical documents that providers use in presentations all around the world. Because it is the only center for the 4 hospitals and other services, it can take a while to get jobs completed. This is causing much frustration and close calls for getting the materials in time.
You have received a proposal to purchase a top-of-the-line printer for each of the 4 hospitals. This will take some of the pressure of the media center. The hospitals can do their own small jobs. The digital machines cost between $28,000 and $80,000. This does not include the maintenance agreement. That is an additional $800.00 a year per machine. There is also the option of leasing the equipment. This would cost roughly $1000.00 per month per machine but includes maintenance as needed.
Initial Post: Using the basics of the capital budgeting process, prepare a memorandum to the CEO recommending one of these 2 choices or another one that you uncover during your research. Be sure to justify your response. In the word document, also indicate what you considered for the following:
Identify the opportunities available to the company
Obtain all the pertinent information
Estimate the cost (based on the information you have) for the annual costs (you may have to do some additional research)
Apply one or more of the decision rules (Discuss if you would use NPV, IRR, or payback period and why)
Make the decision
The initial posting should be prepared as a Microsoft™ Word document, and then attached to the unit discussion thread. There is no minimum or maximum in terms of the word count; however, the response should explicitly address all required components of this discussion assignment. The document should be prepared as a practical business deliverable (single-spaced) and reflect higher-level cognitive processing (analysis, synthesis, and evaluation).
