Under what conditions should ABC build a second e-waste factory?

Under what conditions should ABC build a second e-waste factory?

• A. Market demand alone is sufficient.
• B. Government subsidies are available.
• C. Market demand, supply access, and investment appraisal must be strong.
• D. There is no need to consider these factors.

Answer: (C)

When deciding to build a second e-waste factory, you need three connected safeguards in place: there must be strong market demand to justify the extra capacity, reliable access to the inputs and distribution channels needed to operate another plant, and the investment must be financially viable after considering costs, risks, and the time value of money. If demand is uncertain, the plant may sit idle; if supply or logistics are weak, costs rise and output can’t be delivered smoothly; and if the incremental project doesn’t pass investment appraisal (positive NPV/IRR above the required rate), the expansion would destroy value. Subsidies can help, but they don’t by themselves guarantee profitability, and ignoring these factors would be risky.

When deciding to build a second e-waste factory, you need three connected safeguards in place: there must be strong market demand to justify the extra capacity, reliable access to the inputs and distribution channels needed to operate another plant, and the investment must be financially viable after considering costs, risks, and the time value of money. If demand is uncertain, the plant may sit idle; if supply or logistics are weak, costs rise and output can’t be delivered smoothly; and if the incremental project doesn’t pass investment appraisal (positive NPV/IRR above the required rate), the expansion would destroy value. Subsidies can help, but they don’t by themselves guarantee profitability, and ignoring these factors would be risky.