The cost figures for the new product that had been prepared by the production engineering
In addition to the WBS and in order to calculate roughly the PEP’s costs, the PMC will be using approximate estimate. The PEP’s cost is estimated by analogy to the Morgan Water Plant Rehabilitation program, in Cleveland, OH, which has a similar scope of work and capacity (Shook Construction 2013) (Kerzner 2013, pg. 680). The total cost for the Morgan Water Plant Rehabilitation program was $26 million; the Baldwin Water Works Plan Enhancement Program is 15 percent more difficult, taking under consideration the delicate work necessary for the renovation of the historical administration building. These result in an estimated cost of $30 million for the completion of our PEP (Kezner 2013, pg. 680) (www.shookconstruction.com). Finally, the PMC identifies two types of budgets: distributed budget is defined by the man-hours an required for the achievement of the tasks and subtasks established in the WBS, and the essential materials and equipment needed (i.e. 2,500 tons of 20” by 48” ductile iron piping, 48” electrically activated valves, PLC-Based control instruments, filter medias, slate shingles, crane, drillers, concrete, iron gunnels, masonry, exterior windows); management reserve of $3 million used in case of escalations in construction workers salaries, unforeseen delays resulting during
* Finance: To build the new plant, the company needs to invest a large amount of capital, thus it should identify whether its current finance is enough for investing or it needs to attract more money. If not, the company may choose some kind of financing such as issuing bond, borrowing money or offering IPOs.
of dividends, and a required return of 10 per cent per annum. The value of each
5. A company had outstanding 80,000 shares of $10 par value common stock. During the
a) How many shares will the firm have to issue, assuming they issue the new shares at the current price per share?
fixed costs are expected to be $3,600,000. In order for the new design to enter production,
In this case, the issued shares are not mandatorily redeemable, they are conditionally redeemable. Therefore, this provision is not applicable.
This is beyond the company cost limit set of $16 million capital and $2.6 million yearly payment for improvement. The company is committed to keep the plant but at the basis on the cost limit set.
* Production capacity is 10,000 units a year however they hope to construct a $45 million facility with a capacity of
4. For 2008, Aget is contemplating adding two new dry-process kilns for an investment of 10.7 million €. That investment is expected to increase current capacity by 18%.
Situation Analysis - The Jackson Plant an older, established unit in the Rose Co. has not operated satisfactorily for several years. The Board of
fair value of the plant to be $186 000. Due to recent developments in plant technology, the
| Very high, not fitable for our plant because according our make or buy decision, we only make necessary body parts in order to save capital and better focus on “core business”.
Dear Sir, Enclosed is the report on “The Establishment of New plant”. This report examines the problems, options available and the different scenarios dealt with. Various factors have been taken into consideration for an attempt to take a wiser decision.