This website uses cookies to ensure you have the best experience. Learn more

Cranfield Case Essay

1242 words - 5 pages

1. Incremental cash flows are ultimately the relevant cash flows to be used in project analysis. It is the difference between the cash flows the firm will have if it implements the project, and the cash flows the firm will have if it rejects the project. Although they are a cash expense, interest expenses are not included in project cash flows. We discount a projects cash flows by using its weighted average cost of capital (WACC), which already includes the cost of debt. Therefore, we do not include interest expenses in cash flows because it would essentially be counting them twice.

2. The $150,000 test marketing cost should not be included in the analysis because it is a sunk cost. A sunk cost is an outlay related to the project that was incurred in the past and cannot be recovered in the future. It has already been paid for and does not qualify as an incremental cost, thus making it irrelevant for the analysis.

3. The offer from Cranberry Association to lease the space for $25,000/year over 20 years can be incorporated in as an opportunity cost.
Opportunity costs relate to assets that the firm already owns. Cranfield is using an unused space in the factory that they own for this new project. They are saving an X amount of dollars by already having that space available to them at no extra cost. However, the opportunity to lease for that $25,000/year over the next 20 years acts as an opportunity cost in this case. If the project is rejected, Cranfield could receive that money. If they accecpt the project, it acts as the opportunity cost because it is cash they could have had if they did not use the space for the project. Therefore, $500,000 (25,000*20) would have to be charged to the new project, and failing to do so would result in a false calculation of the projects NPV.

4. If Cranfield does not have the opportunity to lease the space then the space is indeed free and costless, there is no opportunity cost involved anymore. There is no type of cash that Cranfield would be missing out on. However, the space may not technically be free or costless as there could be some maintenance and utility expenses that Cranfield is incurring from the space. Not using the space could incur these expenses further without getting any sort of profit back from it. None of this is mentioned in the case study, so on that basis I will assume that it is free and costless as mentioned earlier.

5. The cannibalization of the profits of regular cranapple sales must be included in the analysis. This an example of a negative within-firm externality and it gets charged as an expense because it is technically lost cash flows. Management of Cranfield would have to use careful thinking and good judgement when analyzing this negative externality. If they choose not to make the lite product because of the cannibalization, then it opens the door for another firm to create the product and steal sales. The textbook sites IBM’s decision in the 1970’s to shift away...

Find Another Essay On Cranfield Case


2486 words - 10 pages the use of the following methods: Primary: consists of a collection of original data collected by the researcher. I found an example of Primary research in the article Knife crime statics; page number 4, table A. The table records the number and proportion of selected violent and sexual offences involving a knife or sharp instrument recorded by the police. In this case the empirical result is the number and proportion of the total selected

An Overview of Doyle’s The Hound of the Baskervilles

2112 words - 9 pages Sherlock Holmes tends to analyze, preserve, and humiliate things around him. Sherlock Holmes has the ability to analysis things around him that normally people would not notice. Holmes ability and skills of observation and the turn of the century scientific culture helps him solve the crime (Cranfield). Moreover, Holmes would use this unique skill to see things that could be used as evidence in a case. At the University of Edinburgh, Doyle discovered

Exegesis of Romans 8.29-39

3397 words - 14 pages transformation in view of the mercy of God.In terms of its wider contextualisation, Cranfield refers to this section as the "climax of the letter;" recognising that Paul has dedicated the majority of his time to the statement of his main theme; and noting that he has rebutted all objections to his case; the apostle now celebrates the believer's security in Christ. It is this knowledge and assurance of present victory and future glory, combined with the

The Physics of the Arc

1337 words - 5 pages highlighted by the Study Group 212 ("Physics of Welding") devoted to this matter in the IIW (International Institute of Welding). On the other hand, books and handouts about arc welding are written aiming to transfer new practices and theoretical knowledge to users. And they have to cite definition and characteristics of some fundamentals, such as plasma jet and arc blow formation. For instance, in the case of arc blow, classical pieces of


1743 words - 7 pages variables. Innovation and Reputation; We define Innovation as strategies that provide new opportunities for firm to create products or services,consistent with previous research we define reputation as an assessment of organizations quality or esteem compared to other organization (Deephouse and carter,2005:fombrun,1996.Here innovation and reputation is focused on as the mediators in this case because prior to research shows that both of these

Research Report on Toyota Motor Corporation: Importance of Integrated Production System in a Manufacturing firm to Improve Productivity

3101 words - 12 pages European Industry and the Importance of Modern Technology and Metrology [online] Available from [Accessed 2 August 2010] Bessant, J. (2003) Managing Innovation – moving beyond the steady state, Cranfield University: Cranfield School of Management. Chary, S.N. (2006) Production and Operations Management (3rd Edition), New York: Tata McGraw-Hill. Cooper, D.R. and Schindler, P.S. (2006


2674 words - 11 pages Henning Kagermann. "Reinventing Your Business Model." Harvard Business Review 86, no. 12 (December 2008). Luciano,B Business Models Enabled by Digital TechnologiesA perspective from the fashion sectorStudy report for the EPSRC RCUK DE research


2674 words - 11 pages Henning Kagermann. "Reinventing Your Business Model." Harvard Business Review 86, no. 12 (December 2008). Luciano,B Business Models Enabled by Digital TechnologiesA perspective from the fashion sectorStudy report for the EPSRC RCUK DE research

Recruitment and Selection Process in US MNCs

4146 words - 17 pages case of failure, the expatriate returns earlier than the contract expiry date (Borg and Harzing, 1995). Borg (1988) identified two problems of repatriation: re-adjustment and re-establishment.Readjustment is adjusting to one's native culture again. Returning expatriates often have the experience of second culture shock (Borg and Harzing, 1995). There are several reasons why re-adjustment is required. For example, when the expatriates return, the

Are teens too dependent on technology?

2025 words - 8 pages needs a computer to use online sources and textbooks, search and write the projects and do the online homework. On the other hand, parents can touch with their kids by technologic devices which are great gadgets for communication. In that case, people cannot suddenly remove the technology from their lives because it now controls our lives instead of us. After the power failure, most of the teenagers feel lost, want steadily to turn back their

Consumer Behaviour

3023 words - 12 pages Marketing opportunities and unfilled ?gaps? in a market may be more accurately appraised and identified. Such gaps can be real (e.g. sweet, strong, harsh or mild) or they can be illusionary in terms of the way people want to view the product (e.g. happy, aloof, silly or moody). In the case of the former, product attributes can fulfill these criteria whereas for the latter these attributes might well have to be implanted in the minds of customers

Similar Essays

Universalism Within Romans Essay

1468 words - 6 pages each epoch from the perspective of its end—according to v. 18, condemnation in the one case, acquittal in the other” (Dunn, 298). Interestingly, similar to most modern Universalist scholars, Robert Jewett believes the primary goal of Romans 5 is not to set forth a doctrine of Adam’s sin. However Jewett interprets the dominion of grace to be in the ‘life’ of all believers; Christ’s life defines the future destiny of believers just as Adam’s life

The Strategic Analysis Of Easy Jet And Easy Group The Analysis Of Organisational Assets And Growth Share Matrix Analysis For The Easy Group

3754 words - 15 pages copyrighted as easyJet airline company ltd. The embodiment of the brand on the Internet is the domain name, so it might be expected that the business would be sensitive to similar names. A report on CNN outlined why the easyJet case to have the rights to the domain name (first registered by an ink jet cartridge company) has been rejected by the WIPO. (Cranfield School of Management, 2001)The company has established the customer database and

The Role Of The International Hr Manager

1349 words - 5 pages nature of the IHRM orientation of an organisation lies in the mindsets of the senior managers at headquarters. If senior management does not have a strong international orientation, the importance of international operations may be under-emphasised (or even ignored). This might be the case even in organisations with a truly global geographic scope. In these cases, the organisation adopts a predominantly ethnocentric perspective, in which power

Commentary On 'the Loneliness Of The Long Distance Runner' By Alan Sillitoe

638 words - 3 pages Literacy: Aspects of Working-Class Life' By Richard Hoggart; Hoggart states:'One may call this, making use of a word commonly used by the working -classes, the world of 'Them'. 'Them' is a composite dramatic figure, the chief character in modern urban forms of the rural peasant-big-house relationships. The world of 'them' is the world of the bosses, whether those bosses are private individuals or, as is increasingly the case today, public officials