Reference no: EM13850292

Criteria: One Page Executive Summary

Include: 1) Financial Analyses for each alternative you consider, as directed by Les in his email, 2) your recommendation for which alternative should be chosen, 3) a brief discussion of additional information that would assist you in your evaluation of the alternatives.

Notes:

Entire Concept:  Capacity vs. Demand

Option 1: Alabama is closed but can be retooled and the company would add facilities to accommodate the demand

• 350,000 units capacity
  • Plus 10 percent incremental growing capacity per year
• Cost: $475 million
  • Expressed over 5 years
• Able to begin production of unmet demand as early as 2016
• Reopening will all create more jobs in the U.S.

Option 2: Build facility in Chennai

• Has a growing automotive supply base
• Also has 350,000 units capacity + 10% growth (assume: not necessarily incremental)
• Cost Incentives: Labor costs + Investment cost

Option 3: Appeal: C-Car excess capacity in Europe

• No additional fixed cost
• Shipping Costs (relatively high) $450/unit, $600 + $1200

Key points to include:

Variable Cost per unit: $14000 (includes material, warranty, and freight costs to the plant)

Allocated Fixed Costs (Existing) Production: $1100

Labor and Overhead - $1200 per unit (average-varies by location

North America (Alabama) - $1500

Europe                                   $2000

Asia-Pacific (Chennai #1)       $500

Corporate Weighted Average Cost of Capital - 12%

Corporate Tax Rate - 35%

Depreciation - Tooling & Equip.-varies based on expected life

Land, facilities - 50 years

Assume straight line depreciation in all cases

Operating Margin = profit (before tax)/ total revenue

= Net Revenue - Variable Cost - Labor & Overhead - Program Spending - Other Fixed Cost

Inventory Valuation: FIFO

How does it affect the income statement?

Attachment:- MBA Case for Campus Interview (Campus Hires).pdf