Johnson Manufacturing- Application Tracking System Recommendation & Implementation- Johnson, a privately held family business, has become a US industry leader in the manufacture of

custom molded plastics and has gained new advantages over its Chinese competitors and favorable labor terms from union negotiations. Several state governments have been courting Johnson executives after the recent announcement that Johnson intends to build two new manufacturing facilities in the next 18 months. Each facility is anticipated to eventually employ 250 new employees. Johnson currently has one facility employing 900 team members across all functions including administrative and executive employees. The Human Resources team at Johnson has been struggling over the past several years to keep up with the rapid pace of growth in the business. In particular, recruitment and hiring processes are highly disorganized. Business leaders at Johnson are concerned with slow hiring times for open positions across the board and are frustrated with the lack of metrics and reporting available from the HR team about recruitment progress. A key issue is related to new adds and replacements for manufacturing employees. At present the average time-to-hire for a skilled manufacturing tech (MT) is 58 days. Given the assertive hiring objectives coming over the next two years HR knows something must be done to accelerate hiring and to improve communication with business leaders in regards to the recruitment process. Last year your HR team attempted to get approval on implementation of an applicant tracking system to support your efforts but the request was declined. The COO, Jane Trent, who leads manufacturing operations said at the time, The problem with the HR team is not that they need better technology to get the hiring done. What they need is to work harder. Hey, we operate 24/7, maybe the HR team should put in the hours! There is no way I would support an investment in new HR technology. They should show us they can work smarter. After this experience, the Human Resources team felt challenged to justify the much needed ATS investment. At your most recent Human Resources team meeting the Director of Recruitment said, We have got to get that ATS or we are going to be in bad shape! Your team decides to approach the Director of Finance to work through a justification for the new software. After thinking through the proposed ATS you have assembled the following data- Implementation costs for new ATS including training for managers and HR team- $1,250,000 The annual licensing costs for the ATS are $12,000 The Information Technology Department must hire an additional desktop support team member (with annual compensation and costs of $128,500) to support the ATS project and this position must be funded through the HR department. Cycle time to hire manufacturing techs will be reduced to 29 days after ATS installation ATS has a useful life of 10 years Currently Johnson pays direct hire fees of $2,000 per MT to Acme Staffing who has been helping Johnson with recruitment (last year Acme hired 70 MTs) and implementation of the ATS is expected to reduce agency fees by 80% over present levels Hiring administrative costs related to manually processing of employment applications and resumes is expected to decline by $31,000 annually

Johnson had budgeted for two new HR Managers at each of the new planned facilities. One of the managers was planned to handle labor relations and the other was slated to drive recruitment efforts. The two additional recruitment hires will not be needed with the new efficiencies created by the ATS. The budgeted salary for each HR recruitment hire was $70,000 with an incremental $21,000 in costs/position attributed to benefits and taxes. The CFO had previously calculated that the daily profit attributed to a manufacturing tech is $141.12 with each tech working 18 shifts per month, vacancies in the MT position unfavorably impact profitability for each and every day they remain open In addition to replacement of attrition you have determined that the company will need to hire 100 staff for the new facilities each year for the next 5 years until the operation reaches full maturity. You have determined the hiring projections for the next 10 years-. Johnsons capital structure is comprised 50% long term debt with a cost of 7% and 50% retained earnings with a cost of 12%. Finance has issued guidance indicating that all new capital projects must produce a required rate of return exceeding 15%. For budgeting purposes, the firm assumes a corporate tax rate of 30%.

I need to find the WACC.