Accounting Question

Topic: Amazon

• Discuss the company’s future investment plans that include things like new buildings, equipment, technology, etc., including why the company is pursuing it.
• Share summary of net cash flows expected from the investment (inflows and outflows).
• Note, this is a future investment, not a historic one. Also, this is not discussing future or past revenue streams – it is about investments and their related returns.
• If you cannot find details on future investment, you may suggest an investment and estimate related cash flows.
• This section should be one to two pages in length

Week 6: Future opportunity of assessment
o Length: 2 to 3 paragraphs
o Content: In this section you will discuss future plans the company has to achieve its short
and long term goals and objectives and its plans for the future.
▪ What are the top growth opportunities the company is focusing on for the next five
years?
▪ Include a brief overview of the opportunities as well as insights into financing and
potential impact to the company.
***********************************************************************************
Williams’ Widgets has a bullish outlook on the future and is focused on several growth opportunities.
The biggest opportunity – based on investment, impact & risk – is building a new domestic production
facility that will dramatically reduce lead times, costs and risks/disruptions relying on outside vendors to
deliver to their production needs.
This new facility will be located approximately 100 miles away from their current headquarters, which
will add complexity in business operations and require a team to be stood up to lead the production
capability being brought in-house. As a result, significant costs will be incurred over the next 3 years to
build, staff and train the team at the new facility. Annual costs to complete this activity are $6 million.
Once the facility is operational, the annual costs to staff and produce goods will be approximately $2
million.
While the new facility will greatly increase expenses, internal production is also estimated to increase
profits due to decreased production costs and access to increased capacity to pursue additional
customers. After the facility is up and running, profits are projected to increase $5 million per year. In
the first 10 years of the project, the company anticipates being able to recoup costs and begin to profit
from the expansion going forward.
While the investment requires a large cash outlay and will take years to pay off, I believe Williams’
Widgets is making a strategic, forward-looking investment that will position them for continued growth
for decades to come.
Cash Flow Illustration
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
Total
Cash Outflows $ (6,000,000) $ (6,000,000) $ (6,000,000) $ (2,000,000) $ (2,000,000) $ (2,000,000) $ (2,000,000) $ (2,000,000) $ (2,000,000) $ (2,000,000) $ (32,000,000)
Cash Inflows $
$
$
$ 5,000,000 $ 5,000,000 $ 5,000,000 $ 5,000,000 $ 5,000,000 $ 5,000,000 $ 5,000,000 $ 35,000,000
Net Cash Flow $ (6,000,000) $ (6,000,000) $ (6,000,000) $ 3,000,000 $ 3,000,000 $ 3,000,000 $ 3,000,000 $ 3,000,000 $ 3,000,000 $ 3,000,000 $ 3,000,000
PV Inflows
PV Outflows
Net Impact
$ 28,507,957
$ (28,374,851)
$
133,106