Question

OPERATIONS MANAGEMENT IN THE SUPPLY CHAIN: DECISIONS & CASES (7th Edition)

Chapter CSP, Problem 1DQ 1.

Which location provides Polaris the greatest cost advantage? Calculate the NPV of the three locations using a 10% discount rate. (PLEASE SHOW MATH. How you get each number to enter into the equation)

Answer 1

If the company has more than one project to invest in, it will have to put some factors into consideration one of them being the value of the net present value. The higher the net present value that an investment is entitled to, the more profitable it is. Polaris will, therefore, go to Mexico which cost advantage tends to higher than that of China. The net present value

(NPV)=PV+CFO.

China NPV is 11.6453-10.0000=1.6453

Mexico NPV is 11.4231-9.5=1.9231

USA NPV is 1.2118.