CAPITAL BUDGETING ANALYSIS FOR GEORGE’S TRAINS 2Capital Budgeting Analysis for George’s TrainsGeorge Olieux started his own business, a model train hobby shop, called George’s Trains. He began doing occasional repairs on model trains in his home and business gradually grew so he decided to buy out a model train store. He had no capital so he acquired a bank loan for the business and some initial inventory. Soon new buyers of the building where his store is located wanted to terminate lease. George decided to buy the building himself and received a bank mortgage loan for this purpose. Next, he noticed sales of the classical Lionel trains dropping and smaller trains becoming more popular. He made a capital budgeting decision to stock more small train models and open a new product line of racecars. George has made significant investments in his small business as it slowly grows. “The ability to identify which assets are expected to add value to the firm is central to the financial management role” (Byrd, Hickman, & McPherson, 2013, 6.1). I will help George by analyzing his investment choices to determine if they are expected to add value to his business and provide financial management advice to aid George’s Trains’ continued growth.George’s Capital Budgeting PracticesThis is George’s first entrepreneurial adventure and he has managed it fairly well. He hasresponded to growth opportunities, facilities issues, and market changes by investing more into the business. George has taken out a loan for purchasing the business and increasing inventory, amortgage for purchasing the building, and has invested in new product lines – smaller trains and racecars. George’s working capital and investment capital is reliant on bank loans from one bank. He obviously has a good relationship with the bank and a good credit history in order to receive three different loans. However, he should not plan on continued support until he has paidof at least one or two of his existing loans.
Factors AfecTng Capital BudgeTng DecisionsCapital budgeTng de±niTon:Let’s begin by defning Capital budgeTng. Capital budgeTng can be defning as a plan oF resources that a frm or industry can properly invest their capital. When a company parTcipates in an investment they are looking to gain Future opportuniTes and profts. ±hat’s why it’s important to consider the necessary essenTal elements when making decision concerning capital budgeTng.IF Pepsi Cola decides to obtain the new computer network system, it will lessen the Tme on delivery and orders For their clients. ±here are several Factors that should be consider beFore fnalizing their decision. Ihave listed a Few below:²undsGov. PoliciesLegal regulaTonsProper Capital For the project and structureAnd etc. In order to implant the system into their company, su³cient Fund has to be available. Which leads to this quesTon, ‘Does Pepsi cola have the proper Funds to install this project?’. Or will they have toinvest in borrowing the fnances For this project. Another concern is the capital structure oF Pepsi Cola. Is