Director of Facilities: A construction contract was signed inlate 20Y5 for the construction of a new factory building at acontract cost of $10,000,000. The construction is scheduledto begin in 20Y6 and be completed in 2009.Vice President of Manufacturing: Once the new factorybuilding is finished, we plan to purchase $1.5 million inequipment in late 20Y7. I expect that an additional$200,000 will be needed early in the following year (2018)to test and install the equipment before we can beginproduction. If sales continue to grow, I expect we'll need toinvest another $1,000,000 in equipment in 20Y9.Chief Operating Officer: We have really been growing latelyI wouldn't be surprised if we need to expand the size of ournew factory building in 20Y9 by at least 35%. Fortunately,we expect inflation to have minimal impact on constructioncosts over the next four years. Additionally, I would expectthe cost of the expansion to be proportional to the size ofthe expansion.Director of Information Systems: We need to upgrade ourinformation systems to wireless network technology. Itdoesn't make sense to do this until after the new factorybuilding is completed and producing product. During 20Y8,once the factory is up and running, we should equip thewhole facility with wireless technology. I think it would costus $800,000 today to install the technology. However,prices have been dropping by 25% per year, so it should beless expensive at a later date.Chief Financial Officer: I am excited about our long-termprospects. My only short-term concern is managing ourcash flow while we expend the $4,000,000 of constructioncosts in 2016 and $6,000,000 in 20Y7 on the portion of thenew factory building scheduled to be completed in 2009.Use this interview information to prepare a capitalexpenditures budget for Omicron Inc. for the years 20Y6-20Y9.Omicron Inc.Capital Expenditures BudgetFor the Four Years Ending December31, 20Y6-20Y9ItemTotal20Y620Y720Y820Y9

Answered: Omicron Inc. Capital Expenditures…

Business

Accounting

Omicron Inc. Capital Expenditures Budget r the Four Years Ending December 31, 20Y6-20Y9 20Y7 20Y6 20Y8 LA 20Y9

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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