Identify whether you support their investment recommendation or not, and explain why. Do you foresee any risks that may prevent the chosen companies from realizing the anticipated benefits of the investment?

The potential investment has a huge effect on budgeting and related business decisions as it would require a large amount of resources in order to run properly. When building a maglev train, the cost to build the system is higher than the cost of the traditional rail system we have in today’s society in America. The cost to build a maglev system is anywhere from $18-55 million per mile while the traditional rail system is $10-40 million per mile. Depending on the material availability and region, the cost per mile to build the maglev system could be comparable to the cost of the traditional rail system (Vuchic & Casello, 2002). However, the maglev system has a long-term cost advantage, in that, the maglev trains are more efficient and cost effective to maintain due to less wear and tear on the cars and rails as the train uses magnets to propel itself forward (Boslaugh, 2014). Additionally, “Maglev trains produce little to no air pollution during operation, because no fuel is being burned, and the absence of friction makes the trains very quiet (both within and outside the cars) and provides a very smooth ride for passengers” (Boslaugh, 2014). Therefore, Tesla, Inc. would be investing in a new venture that is eco-friendly, similar to their current products and services. The company would be required to make business decisions in order to accumulate enough cash flow to begin this project, obtain more investors, ensure governmental cooperation with their project, and allocate resources to the maglev system. It may mean taking resources from other areas of the business until the project is complete, or employing more individuals for this project. Due to the low maintenance costs of this type of train system, it would likely be a high initial investment and drop to a relatively low investment to maintain when the maglev train is fully operational. This would affect short term spending for the company so they could afford the initial investment costs of the train; however, it could mean a steady flow of income for Tesla, Inc. as they continue to develop their electric vehicles. The benefit should outweigh the cost, depending on factors such as land cost, materials cost and availability, and the initial investment cost as the maglev train would generate income and have relatively low maintenance costs. 

References

Boslaugh, S. E. (2014, January 28). Maglev train. Retrieved from