Yash Building Centre: Planning for Expansion
(6 pages of text)
Yash Building Centre, based in Raipur, central India, was in the business of manufacturing fly ash bricks and blocks. At the beginning of 2016, after achieving decent growth and gaining goodwill among local builders and contractors, the managing partner was actively looking to expand business operations into tiles, pavers, and curbstones. He believed this expansion would improve the firm’s profitability by allowing it to take full advantage of its reputation among existing customers. It would also enable the firm to increase its size. A key question was, would this decision facilitate value creation for the firm? To make the investment decision, the managing partner needed to consider the return on investment and the capacity at which the new unit would break even.
This case is suitable for graduate and postgraduate students who are learning the basic concepts of computing cost, capital budgeting, and cost of capital. It can be used in management accounting, financial management, and corporate finance courses. After completing the case, students should be able to do the following:
- Compute a company’s cost and break-even point.
- Understand the connection between the capital budgeting decision, return on investment, and management accounting concepts.
- Compute various budgets based on production, costs, and sales estimates.
- Evaluate the desirability of a potential project by using clear investment criteria such as net present value, and make a decision about whether or note to invest.
India, Small, 2016
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