Capital expenditure program, Business Management

Capital Expenditure Program

Stanaway had assumed responsibility for the Glenlines Plant only twelve months previously and undertook a detailed review of the operations and discovered significant opportunities for improvement in polypropylene production. Some of these opportunities stemmed from the deferral of maintenance over the preceding five years. In an effort to enhance the operating results of the Plant, the previous manager had limited capital expenditures to only the most essential. Now, what had been routine and deferrable was becoming essential. Other opportunities stemmed from changing the current plant design that would save energy and/orimprove the process flow:

(1) relocating and modernising rail tanks unloading areas. 

(2) refurbishing the polymerisation tank to achieve greater throughput; and

 (3) renovating the compounding plant to increase extrusion throughput.

Stanawayanticipatedexpenditure of $7 million on this program. The entire polymerisation line would need to be shut down for 60 days, however, and because the Sydney plant was operating near capacity, Glenlines' customers would buy from competitors. Hawkins believed the lost customers would not be permanent. The benefits would be a lower energy requirement as well as a 7 percentgreater manufacturing throughput. In addition, the project was expected to improve gross margin (before depreciation and energy savings) from 11.5 percent to 12.9 percent.

Glenlines currently produced 135,000 metric tons of polypropylene pellets per year. Currently, the price of polypropylene averaged $611 per ton for Biotechnique's product mix. The tax rate required in capital-expenditure analyses was 35 percent. Dawkins discovered that any existing plant facilities to be replaced had been fully depreciated. New assets would be depreciated on a straight line basis over 15 years, the expected life of the assets. The increased throughput would necessitate a one-time increase of  inventory equal in value to 3.0 percent of cost of goods. Dawkins included in the first year of his forecast "preliminary engineering costs" of $500,000, which had been spent over the preceding 9 months on efficiency and design studies of the renovation. Finally, the corporate manual stipulated that overhead costs be reflected in project analyses at the rate of 3.5 percent per yearof the cost of assets acquired in the project.

Posted Date: 2/16/2013 6:05:02 AM | Location : United States

Related Discussions:- Capital expenditure program, Assignment Help, Ask Question on Capital expenditure program, Get Answer, Expert's Help, Capital expenditure program Discussions

Write discussion on Capital expenditure program
Your posts are moderated
Related Questions
Question 1: Name and Discuss the key benefits of E-Business? Question 2: (a) Describe the four activities of a Customer Service Life Cycle. (b) Define the Three (3) B

regression line drawn as Y=c+1075x, when x was 2 and y was 239, given that y intercept was 11. calculate the residual

Quality audit is an appraisal of the whole quality control. It is not so much concerned with the quality of the product as with the quality of the product as with the adequa

QUESTION 1 (a) Explain the following terms as used in E-business: (i) Vortal (ii) Countermediation (iii) e-Auction (iv) Cookie (v) B2B e-business model (b) Wi

QUESTION You have been appointed as the head of the treasury of an international firm with many subsidiaries abroad. The management of this multinational consists relatively of

Question 1 List at least 6 post drug approval activities of FDA. Write brief on a) Medwatch b) AERS c) Pharmaceutical Industry surveillance Question 2 Write a note on the

Question: "Conflict, then can be regarded as a reality of management and organizational behavior and can be related to power and politics... yet conflict is another term which

QUESTION Problem solving lies at the heart of educational administration. Daily, problematic situations, emerging from the complex and unpredictable nature of the school enviro

What is Collective Bargaining? Collective Bargaining: It is constitutes the negotiations among the management and the union along with the ultimate purpose of agreeing on

This case has been framed in order to test the skills