KPG Groceries Capital Budgeting Case

2 KPG Groceries Capital Budgeting Case Analysis Capital budgeting enables planners to forecast future financial impacts of decisions on a company. The capital budgeting approach has assumptions that enable the criteria to give reliable results, which can help the company to achieve its short-term and long-term goals. Expansion of business is a complex process and requires careful analysis. For instance, the expansion comes with financial and operational risks that must be considered before making the decision to open the subsidiaries. The initial outlay of money towards the expansion is also high. It requires careful analysis of how long the company will take to recoup the expenses should the decision to open a new distribution center be approved.

The First Option Companies with sustainability strategies deemed functional by the shared experience have increased sales, leading to high profits (Rafi, 2021). As outlined by Jones, the first option available to the company is to avoid taking steps regarding opening a new distribution center until the beginning of the year, when the new distribution center in a central place will be ready for use (Lovata & Murray, 2017). The vice president determined that if a central distribution center is successfully identified at the beginning of the new year, the deal will save the company 700,000 trucking miles annually. The 700,000 trucking miles imply a reduced cost of fuel, reduced salaries, and reduced emissions to the environment. The central distribution center will enable the company to gain a competitive advantage over other companies, and the move will improve the company's reputation as a good corporate citizen.

The disadvantage of the first option is that the company has to save time waiting for the new central place to be ready. The waiting time has cost implications for the company. For