Capital Budgeting: Riordan Manufacturing

Essay by Aguilar22204University, Bachelor'sA, May 2008

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Riordan Manufacturing, a global plastics manufacturer, is a Fortune 1000 enterprise with revenues of more than $1 billion (, 2006). In an effort to increase its market share and maintain its position as an industry leader in the use of polymer materials, Riordan is continually striving to refine its existing capital projects and investments as well as seek out new opportunities. The following examples highlight the potential capital budgeting projects the company might seek out in the following year and discuss the investments and their importance to the company.

Capital Project IConsidering that capital budgeting is the planning process used to determine if a company will benefit from purchasing new equipment, new plants or new property, it appears that Riordan Manufacturing is geared toward future expansion. Expansion involving new plants should be a goal for any company looking to increase profitability and market presence. Part of Riordan's mission statement reads, "We must be focused in achieving and maintaining reasonable profitability to assure that the financial and human capital is available for sustained growth" (,


Riordan Manufacturing has experienced fairly consistent growth and profitability in the past few years increasing revenues from $8.5M in 2004 to $8.7M in 2005. Riordan recently expanded with a new plant in China in 2000. According to the company's economic forecast, the United States economy has demonstrated a slower yet stabilized growth market. Considering that the U.S. dollar will not lose much value in the China market, it appears the Riordan should look into another new plant in China rather than seek expansion within the United States.

Capital Project IIRiordan Manufacturing is an industry leader in the field of plastic injection molding. With state-of-the art design capabilities, the company creates innovative plastic designs that have earned international acclaim. Attention to detail, extreme precision and enthusiastic...