Our friends at SohnCo Baby Products Division (BPD) are looking to expand due to their success...
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Our friends at SohnCo Baby Products Division (BPD) are looking to expand due to their success in manufacturing a variety of university affinity baby toys and products. They have hired your consulting firm to evaluate where to locate and build the newest BPD plant. Somewhere along the way, while planning expansion, BPD decided to have a university design competition for this plant. Resulting from this competition, two cities have been identified and asked to develop formal proposals: Wichita, KS and Worcester, MA. Please refer to the table below: Wichita, KS Worcester, MA S400 MM $100 MM 5 years 10 years Initial investment Life of facility Annual expenses Labor $120 MM Power $2.5 MM Materials $10 MM Maintenance SSMM Property taxes and insurance S4MM Total annual expenses $40 MM $3 MM $5 MM $2MM $20MM $141.5MM 570MM MM means million Given the above data, use the following assumptions and facts to assess the two plans: a) Depreciation is 20% per year for five years: Wichita plant. It's 10% per year over 10 years in Worcester. b) Assume repeatability for the Wichita plant. c) Sohn Co uses a 12% after tax rate of return for decision making.. d) Assume revenue of $250 MM. e) Taxes are estimated as 25% in Wichita and 40% in Worcester You need to evaluate these data and make a recommendation to BPD. Keep in mind that while BPD will evaluate AT MARR, the construction projects and subsequent labor benefits coupled with a tax base increase will make plant selection a complex policy decision. Our friends at SohnCo Baby Products Division (BPD) are looking to expand due to their success in manufacturing a variety of university affinity baby toys and products. They have hired your consulting firm to evaluate where to locate and build the newest BPD plant. Somewhere along the way, while planning expansion, BPD decided to have a university design competition for this plant. Resulting from this competition, two cities have been identified and asked to develop formal proposals: Wichita, KS and Worcester, MA. Please refer to the table below: Wichita, KS Worcester, MA S400 MM $100 MM 5 years 10 years Initial investment Life of facility Annual expenses Labor $120 MM Power $2.5 MM Materials $10 MM Maintenance SSMM Property taxes and insurance S4MM Total annual expenses $40 MM $3 MM $5 MM $2MM $20MM $141.5MM 570MM MM means million Given the above data, use the following assumptions and facts to assess the two plans: a) Depreciation is 20% per year for five years: Wichita plant. It's 10% per year over 10 years in Worcester. b) Assume repeatability for the Wichita plant. c) Sohn Co uses a 12% after tax rate of return for decision making.. d) Assume revenue of $250 MM. e) Taxes are estimated as 25% in Wichita and 40% in Worcester You need to evaluate these data and make a recommendation to BPD. Keep in mind that while BPD will evaluate AT MARR, the construction projects and subsequent labor benefits coupled with a tax base increase will make plant selection a complex policy decision.
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Here are the stepbystep calculations for each plant location Wichita KS plant a Depreciation is 20 p... View the full answer
Related Book For
Business and Administrative Communication
ISBN: 978-0073403182
10th edition
Authors: Kitty o. locker, Donna s. kienzler
Posted Date:
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