Arar Corporation’s controller, Abdulrahman, was asked to prepare a capital investment analysis for a robot-guided aluminum window machine. This machine would automate the entire window-casing manufacturing line. Abdulrahman has just returned from an international seminar on qualitative inputs into the capital investment decision and the value chain. He is eager to incorporate these new ideas into the analysis. In addition to the normal net present value analysis (which produced a significant negative result), Abdulrahman factored in figures for customer satisfaction, scrap reduction, reduced inventory needs, and reputation for quality.
With the additional information included, the analysis produced a positive result for the investment. Do you think these other factors should be included in Abdulrahman’s analysis? Elaborate on why or why not.
Sample Solution
