Hot & Cold and Caldo Freddo are two European manufacturers of home appliances that have merged. Hot & Cold has plants in France, Germany, and Finland, where Caldo Freddo has plants in the United Kingdom and Italy. The European market is divided into four regions: North, East, West, and South. Plant capacities (millions of units per year), annual fixed costs (millions of euros per year), regional demand (millions of units), and variable production and shipping costs (euros per unit) are listed in the following table.

		Variable Production and Shipping Costs
		North	East	South	West	Capacity	Annual Fixed Cost
Hot & Cold	France	100	110	105	100	50	1000
	Germany	95	105	110	105	50	1000
	Finland	90	100	115	110	40	850
	Demand are in million units per year
	Demand	30	20	20	35
		Variable Production and Shipping Costs
		North	East	South	West	Capacity	Annual Fixed Cost
Caldo Freddo	U.K.	105	120	110	90	50	1000
	Italy	110	105	90	115	60	1150
	Demand are in million units per year
	Demand	15	20	30	20

Each appliance sells for an average price of 300 euros. All plants are currently treated as profit centers, and the company pays taxes separately for each plant. Tax rates in the various countries are as follows: France, 0.25; Germany, 0.25; Finland, 0.3; UK 0.2; Italy, 0.35.

1. Before the merger, what is the optimal network for each of the two firms if their goal is to minimize costs? What is the optimal network if the goal is to maximize after-tax profits?
2. After the merger, what is the minimum cost configuration if none of the plants is shut down? What is the configuration that maximizes after-tax profits if none of the plants is shut down?
3. After the merger, what is the minimum cost configurations if plants can be shut down (assume that a shutdown saves 100 percent of the annual fixed cost of the plant)? What is the configuration that maximizes after-tax profits?