This 6 page paper examines a case study supplied by the student. In the case Intel have shipped faulty motherboards and will need to raise $1,400 to pay for the recall that is to take place. The paper considers the different financing options that are available, looking at the advantages and disadvantages of each option before determining which is likely to be the optimal choice. The bibliography cites 2 sources.
Name of Research Paper File: TS14_TEintelcap.rtf
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recalled. The cost is estimated to be in the region of $725 million with another $675 being needed to fund the recall and provide the serve of exchanging al of
the motherboards. Looking a the accounts for Intel in 1999, when this scenario is set, there is a strong position, but the company is still reeling from the fiasco
of the chips that did not work which were released in 1995. This is four years before, but the image and damage done to the reputation may be renewed if
this recall is not handled sufficiently efficiently and rapidly. Intel have no choice but to act and remedy the situation, the short term costs will benefit the company in the
long term, increasing market confidence in the company as a supplier of hardware. The question is where should the funds be raised from. There are several choices which we
will consider looking at the advantages and disadvantages of each before reaching a decision. Using Income to pay for the recall The first choice is to pay for
the recall with the use of the revenues that are received. The total required is $725 million + $675 million = $1,400 million. If we look at the net income
before taxes there is a level which could sustain this, as the net earnings before tax would be $11,228 million. The costs incurred would then reduce this with an extraordinary
charge down to $9,828. In terms of accounting policies and results this would not give any major advantages, as however the costs are paid for they will have to
be accounted for as costs on the income sheet also known as the profit and loss sheet). However this will have a knock on effect that will impact on the
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