Capital Budgeting Case Study Analysis

Capital Budgeting Case Study Analysis-84
These detachments provide MAWTS-1 with field units to use during the WTI course.

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Students are taught tactics and uses for a variety of weapons, including how to best utilize them together with other Marine aviation units and command and control systems.

Students are taught about a variety of weapons, Marine Aviation Weapons and Tactics Squadron One (MAWTS-1) conducts this training (two courses per year) at the Marine Corps Air Station in Yuma, Arizona (AZ).

On the other hand, the Marine Corps, like the rest of the Department of Defense (Do D), is facing current and looming budget cuts.

Captain Bruce has been asked to analyze and make recommendations on how to accomplish both of these objectives.

The core activities in this case involve the analysis of cost and discount rate inputs to measure the present value of the costs and the evaluation of the two options..

The backdrop for these two competing alternatives is a federal government attempting to inculcate fiscal constraints and cost cutting within the military.The case is designated to be taught in 1.5 class hours, assuming students have put in at least one hour of preparation outside the classroom either individually or in groups.This case explores the potential cost savings of establishing a Marine Corps Exercise Support Detachment (ESD) in Yuma, AZ.A key component of the WTI course is the fully integrated combined arms exercise.A combined arms exercise involves several hundred Marines playing a war game against a fictitious enemy in which ground troops, armor, artillery (Ground Combat Element), and aircraft (Air Combat Element) engage enemy movements simultaneously.Captain Mitch Bruce sits at his computer pondering how to respond to an upper level request to resolve some potentially contradictory objectives.On the one hand, the Marine Corps needs to continue to maintain readiness via specified required training in order to meet current and possible unknown mission requirements.The transportation costs associated with the detachments’ equipment amount to several millions of dollars per year for the Marine Corps.The Marine Corps Air Ground Combat Center in Twentynine Palms, CA, had a similar issue but found a different approach to conduct operations.A large input cost of the status quo is the personnel cost associated with equipment preparation and embarkation, and post-exercise maintenance. The annual costs of the alternative can then be compared to the annual costs of the status quo to quantify potential annual savings at each level of involvement.The costs of the proposed alternative may be calculated using historical data from similar projects and operations—which can either be provided to students, or which students can be asked to research—as well as Department of Defense (Do D) and U. The time value effect of any annual savings will then need to be analyzed using capital budgeting techniques such as the net present value (NPV) method to show the total cost and/or benefit of the ESD over a range of extended periods.


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