Debating whether to keep producing one of their components

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Company Global Transport, given above, has another strategy to look into. They are debating whether to keep producing one of their components, component A, in the Binghamton area, or to off-shore it another country where labor costs are much lower. If they off-shore the product, there would be a high initial investment, to establish a plant, train the workers etc. The company wants to have a five year horizon for this decision making. The costs are as shown below: Continue in the current location: $2.5 million each year for five years Off-shore location: Set up costs in the beginning: $6 million. And $1.2 million every year for five years. Find out which option is more attractive. Consider a time value of 5%.

Reference no: EM131715382

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