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Valuating excess production capacity

LD

Louis Devries

Board Member, Operations

Fri, $12$:$57pm$

Dear Nicole,

My former colleague, who is the COO at Ferris, just informed me that they are looking to sell excess capacity. This usually indicates lagging sales and a company's need for additional cash. Ferris wants to sell $100$ units $(1000)$ of capacity used for the Future product line. Each unit of capacity is worth $$5$ plus $$3$ per the automation rating. I also know that Ferris is offering a $33\mathrm{.}5\%$ discount on capacity purchase. I$\text{'}$m looking to assess the impact of selling this excess capacity on Ferris, as our products often compete with theirs. Could you tell me how much Ferris would receive when the capacity is sold?

Sincerely,

Louis

Louis Devries

Board Member, Operations $|$ Andrews Corporation

$$1,729,000$

$$1,300,000$

$$2,600,000$

$$871,000$