. The marketing director of National Midland Mortgage has been arguing with senior management about building a $50 million publishing facility. Other managers worried about the assumptions in the analysis that support the investment—an increase in the number of mortgages processed and a reduction in processing costs. What if the mortgage market did not grow as expected? • a.Should National Midland invest in the publishing facility? • b.What assumptions might the marketing director have made to make the investment look worthwhile?
If the mortagage market did not grow then the same rate of
return would be expected from the mortagage. It could be a loss for
the financial institutes who have to take the returns to
itself.
The National Midland should not invest more because it would
increase the mortagage process.
The assumptions which the marketing director must take to
investment should include the loss and profits to be earned in
future investment if any. There must be records of transactions
made by the company so that future investments could be
checked.
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