Strategic Management Accounting - Assignment Example | Topics and Well Written Essays - 1500 words

Strategic Management Accounting - - Assignment Example The company has been able to maintain a competitive edge through increased innovative, good corporate image and technological advancement. In this organization, decision making can be characterized as participatory where all the management is employed in decision making process. The second problem is presence of management teams that does not have long-range plans, also the management team is not dynamic, i. e., the majority of the management impedes change in the organization. In order to determine whether to replace the existing machine with the new mechanism, we need to calculate the Net Present value relative to the old machine. In order to achieve this objective we will follow the following steps: The decision criteria of the company are to select projects that have their payback period as five years and below. In the case of AL II, the payback period is 9.05 years, therefore, the replacement process should not be undertaken. My advice is to reject the project since the IRR is below the company cost capital. In addition to this, internal rate of return is one of the best criteria as it is considered to be a measure of marginal efficiency of the capital invested. There is need to analyze the firm financial capacity toward financing the replacement proposal. If it is not financially capable in implementing the proposal, the firm should search from resources elsewhere. In this case, the firm may result in borrowing, thus, the firm should consider the cost of borrowing and covenants attached to such borrowed funds (Hoque, 2005). It is necessary to consider the level of environmental degradation occasioned by the implementation of the proposal. If the existing machines pollute the environment at higher rate, that increases chances of the company facing legal suits emanating from environment pollution, the company might consider undertaking the proposal. Another strategic factor that needs to be