Case Study : Capital Budgeting In The Federal Government: The Case Of A Marine Corps Exercise Support Detachment In Yuma, Arizona

Abstract

This case requires the use of capital budgeting techniques to compare two competing alternatives to carry out a particular required Marine Corps training exercise. Training outcomes are assumed to be the same under each alternative with the focus on lowering costs as the primary objective. The core activities in this case involve the analysis of cost and discount rate inputs to measure the present value of the costs and the evaluation of the two options. The backdrop for these two competing alternatives is a federal government attempting to inculcate fiscal constraints and cost cutting within the military. While this case is based on an actual, real set of facts, people, and organizations, some specific data have been changed for proprietary or educational reasons.

The case lends itself to student group project assignments with respect to developing a capital budgeting analysis for the “Marine Corps Exercise Support Detachment.” Proposed solution(s) should determine the costs of both the “status quo” (current situation) and the proposed “alternative,” and, subsequently, which alternative to accept. Furthermore, students should give consideration to the various inputs of their prospective capital budgeting models as well as consider factors other than costs that may affect the decision.

The case has a difficulty level appropriate for a senior course at the undergraduate level or an MBA graduate-level course. The case is designated to be taught in 1.5 class hours, assuming students have put in at least one hour of preparation outside the classroom either individually or in groups.