Guillermo Furniture Store Recommendation

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Guillermo Furniture Store Recommendation Irene Better, Marissa Luck, Nicole L. Moore, Eileen Sitler, and Kellie Zwickl FIN/571 September 20, 2010 Marcel A. Santiz Guillermo Furniture Store Recommendation Life in Sonora, Mexico is not what it used to be. In fact, things are quickly changing in the communities of this once sleepy town. Changes in the economic environment to include the increase in labor costs are the reasons the furniture store manufacturer is seeing a decrease in his profit margins as prices begin to fall and costs rise. He will need to examine and develop a plan to gain competitive advantage, create value and economic efficiency, and closely watch capital markets (Emery, Finnerty, & Stowe, 2007). In this scenario, Guillermo Navallez must effectively analyze and choose the best of three business alternatives to deal with new competitors entering the furniture manufacturing market. In performing a successful analysis, he will “determine the optimal weighted average cost of capital and discuss the use of multiple valuation techniques in reducing risks (University of Phoenix, 2007, Week Four Supplement);” include accurate calculations of “the net present value of future cash flows for each of the business alternatives (University of Phoenix, 2007, Week Four Supplement),”and he will make a recommendation and justification of his final decision. Hi Tech Alternative Guillermo’s competition is using new technology to increase production at lower costs; however, there is a large capital outlay for the building upgrades and the tangible cost of the new equipment. In addition to these costs are also the costs for a maintenance person and highly skilled operators. Regardless of the additional costs, the net income before taxes for the first month is 195,564 dollars. The overheads for the plant including benefits, utilities, and

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