Capital Budgeting Paper- Kudler Fine Foods

Essay by davelong13University, Bachelor'sA, August 2007

download word file, 4 pages 5.0

IntroductionCapital budgeting decisions are crucial to a firm's success for several reasons. First, capital expenditures typically require large outlays of funds. Second, firms must ascertain the best way to raise and repay these funds. Third, most capital budgeting decisions require a long-term commitment. Finally, the timing of capital budgeting decisions is important. When large amounts of funds are raised, firms must pay close attention to the financial markets because the cost of capital is directly related to the current interest rate.

The virtual organization Team A chose to study was Kudler Fine Foods, which is a local upscale specialty food store located in the San Diego metropolitan area. In our paper, Team A will identify at least three potential property, plant, and/or equipment capital projects as examples of investments the Kudler organization might make in the next year and describe these investments and their importance to the Kudler organization.

Capital Project AKudler Fine Foods is looking to expand into Carlsbad, CA and will be looking for a property to purchase because of this expansion.

In carving out a niche in the gourmet foods market, Kudler has expanded to three stores in the north San Diego area and Carlsbad is a natural progression into an area just north of the most recent store in Encinitas. Carlsbad has many of the same qualities that La Jolla, Del Mar and Encinitas have a beachside community with a wealthier population. The La Costa community within Carlsbad is ideal as it has a mix of wealthy individuals in residential communities coupled with retail shopping and the world class La Costa Resort. The area is considered the third wealthiest neighborhood according to Forbes magazine and is just behind La Jolla and Rancho Santa Fe in San Diego County. This will require a large capital outlay and...