Liquid Chemical, Ltd. sells a range of high- grade chemical products throughout the Pacific North-west from its main plant in Vancouver, British Columbia. The company’s products, because of their chemical properties, call for careful packaging. The company has always emphasized the special properties of the containers used. Liquid Chemical had a special patented lining made from a material known as GHL, and the company operated a department specially to maintain its containers in good condition and to make new ones to replace the ones that were past repair.
Tom Walsh, the general manager, had for some time suspected that the firm might save money and get equally good service by buying its containers outside. After careful inquiries, he approached a firm specializing in container production, Packages, Inc., and obtained a quotation on the special containers. At the same time he asked Amy Dyer, the controller, to let him have an up- to- date statement of the cost of operating the Container Department.

Prepare a net present value analysis of Liquid Chemical’s three alternatives. Use a five- year time horizon. You don’t have to make additional assumptions (regarding inflation rates, for example) beyond the information provided in the case.

  • CreatedJanuary 15, 2015
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