Goats: The Green Alternative (B)

Case Solution

David Currie, Kyle S. Meyer
Ivey Publishing ()

The owner of the goat herd had successfully rented part of his herd to clear the land at a nearby resort. The clearing contract for the complex generated a small profit and the owner is now evaluating the prospects of applying for similar clearing projects in the area. The owner believes that the profitability of this business is limited by the size of the truck and trailer used to transport the goats to the construction site. He argues that a larger truck and trailer would allow him to move more goats to the construction site each day, generating additional income. He also realizes that a larger truck and trailer would lead to increased operating costs. The owner determines the investment required to upgrade the truck and trailer. Next, he must determine if the additional revenue and costs associated with the larger truck and trailer would justify the initial investment. This case provides a realistic analysis of incremental revenues and costs as part of investment planning. Case (B) can be used independently of case (A) if the teacher wants to focus solely on capital planning.

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