Liquid Chemical

785 Words Dec 12th, 2011 4 Pages
In the given case Liquid Chemical Company manufactures and sells a range of high-grade products. Many of these products require careful packaging. The company has a special patented lining made that it uses in specially designed packing containers. Mr. Walsh the general manager was carefully looking at the problem and as a matter of solution he came up with the four alternatives: * Alternative A: It is the status quo. (i.e., Liquid Chemical Co. will continue making the containers and performing maintenance.) * Alternative B: Liquid Chemical Co. will continue making the containers, but it will outsource the maintenance to Packages, Inc. * Alternative C: Liquid Chemical Co. will buy containers from Packages, Inc., but it will …show more content…
.751315 | 0.683013 | 0.620921 | Present Value | -613727 | -557934 | -507213 | -461102 | -595526 | Total Cash Outlay | -2735502 |

Option B | Year | 1 | 2 | 3 | 4 | 5 | Cost of GHL net of tax savings | | | | | -72000 | Purchase of other materials | -450000 | -450000 | -450000 | -450000 | -450000 | Supervisor | -50000 | -50000 | -50000 | -50000 | -50000 | Worker | -360000 | -360000 | -360000 | -360000 | -360000 | Rent of warehouse | -85000 | -85000 | -85000 | -85000 | -85000 | Maintenance | -36000 | -36000 | -36000 | -36000 | -36000 | Other Expense | -92500 | -92500 | -92500 | -92500 | -92500 | managers Salaries | -80000 | -80000 | -80000 | -80000 | -80000 | Maintenance Contract | -375000 | -375000 | -375000 | -375000 | -375000 | Total Costs | -1528500 | -1528500 | -1528500 | -1528500 | -1528500 | Tax Savings | 611400 | 611400 | 611400 | 611400 | 611400 | Cash Flow Due to Costs | -917100 | -917100 | -917100 | -917100 | -917100 | Tax Effects of Depreciation | 32000 | 60000 | 60000 | 60000 | | Tax Effect of GHL | 80000 | 80000 | 80000 | 80000 | | Total Cash Flow | -805100 | -777100 | -777100 | -777100 | -989100 | PVIF @ 10% | 0.909091 | 0.826446 | 0.751315 | 0.683013 | 0.620921 | Present Value | -731909 | -642231 | -583847 | -530770 | -614153 | Total Cash Outlay | -3102910 |

Option C | Year | 1 | 2 | 3 | 4 | 5 | Cost of GHL net of tax savings | | | | | | Purchase of other materials | -450000 | -450000…

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