GROUP (B) A company is considering the manufacture of a specialty chemical for use the synthe tic fiber industry. An outside consulting firm has estimated that a fixed capital investment of S15MM will be required to manufacture 18 MM lb of product annually. The marketing department be lieves that a selling price of 70 cents/b would be competitive with similar products in the market place. You may assume that all product made is sokd. The following informatios viable Raw material costs 5.6 cents/lb Utilities Labor Supervision Fringe benefits shift around the clock 10% of labor 40% of labor plus supervision 15% of labor 6%FCly 4.0 cents/lb Maintenance Waste disposal All other direct expenses may be assumed to be avera 5 yr straight-line 2%FCI 0.4 cents/lb 8% of annual sales 15% TCI Depreciation Plant indirect expenses and shi General overhead expenses Working capital Neglect start-up ex Prepare: a. Total operating expense report b. Estimate of capital requirements c. Net profit after taxes d. Based upon your calculations, what recommendations could you make to management conceming this proposed venture? Be sure to substantiate your answer s) with numbers and Figures e. If the company decided to have a loan to execute this project, suggest the following 1The amount of the loan Dollars 2The project Duration and 3. The koan Pay off strategy and period GROUP (B) A company is considering the manufacture of a specialty chemical for use the synthe tic fiber industry. An outside consulting firm has estimated that a fixed capital investment of S15MM will be required to manufacture 18 MM lb of product annually. The marketing department be lieves that a selling price of 70 cents/b would be competitive with similar products in the market place. You may assume that all product made is sokd. The following informatios viable Raw material costs 5.6 cents/lb Utilities Labor Supervision Fringe benefits shift around the clock 10% of labor 40% of labor plus supervision 15% of labor 6%FCly 4.0 cents/lb Maintenance Waste disposal All other direct expenses may be assumed to be avera 5 yr straight-line 2%FCI 0.4 cents/lb 8% of annual sales 15% TCI Depreciation Plant indirect expenses and shi General overhead expenses Working capital Neglect start-up ex Prepare: a. Total operating expense report b. Estimate of capital requirements c. Net profit after taxes d. Based upon your calculations, what recommendations could you make to management conceming this proposed venture? Be sure to substantiate your answer s) with numbers and Figures e. If the company decided to have a loan to execute this project, suggest the following 1The amount of the loan Dollars 2The project Duration and 3. The koan Pay off strategy and period
