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1. The spreadsheet below estimates the total cost for each supplier. Analyze each of three supplier options and compare their costs to the cost of the U.S. supplier.

2. What additional cost elements for each supplier should Beth consider? Are there other issues besides cost that Beth should evaluate?

3. Consider environmental impact of doing business with each of these suppliers. How does this impact the total cost and your decision-making?

4. Which supplier do you recommend?

5. Looking at your preferred supplier, what suggestions do you have for lowering your total costs?

6. Imagine your boss asks you to look at a 3-year contract. After some quick analysis, you determine that prices in China and Ukraine will rise even as prices in Netherlands and U.S. decrease (see the following table). You expect this lawn mower to be a big hit with sales increasing as follows:

   Year 1: 36,000 (3,000 per month)

   Year 2: 72,000 (6,000 per month)

   Year 3: 108,000 (9,000 per month)Calculate the net present value (NPV) for each supply option using a 10% cost of capital. Which supplier would you choose now? Why?

China Ukraine (Container) (Container) Netherlands (Container) U.S. (each) Calculations Unit Price Packaging Tooling Inland Transportation $42,000.00 $2,000.00 $100.00 $200.00 $3,000.00 $200.00 $420.00 $120.00 Price * 1000 $1.00 Cost 1000 $0.03 Tooling Cost/Annual Rate of Sale * 1000 $5.20 Stated Stated Stated Ocean Transportation Freight Forwarder Fee Insurance $85,000.00 $1,750.00 $125.00 $200.00 $3,500.00 $100.00 $850.00 $400.00 $250.00 $75.00 $1,500.00 $4,250.00 $500.00 1% * container unit price Brokerage Fee $400.00 Travel $60,000.00 $2,500.00 $75.00 $750.00 $4,500.00 $400.00 $600.00 $400.00 $250.00 $200.00 $1,500.00 $3,000.00 $500.00 $1,500.00 $1,200.00 $1,600.00 $1,800.00 $250.00 Stated (Hedging Currency) ($9000 per year/36000)* 1000 Stated Amount Administrative U.S. Port Handling Charge $150.00 $1,500.00 $2,100.00 Stated Duty 5% * container unit price $500.00 Stated Brokerage 2 Port to Avondale Cost of Capital Warehouse Costs Defect Rate Environmental Surcharge $1,500.00 $840.00 $1,600.00 $2,100.00 $1,500.00 $1,700.00 $1,600.00 Stated [(Annual Rate/12) * (Container Value * 3)]/3 Cubest * 1.00 1000 $850.00 Defect % * 1000 * unit price $500.00 Stated Environmental Surcharge Price for Container Price Each $58,860.00 $58.86 $80,775.00 $80.78 $750.00 Stated $105,400.00 Sum of all costs per containter $105.40 $126.23 Unit Price Year China W NP $58.86 $67.69 $74.46 Eastern Europe $80.77 $90.47 $97.71 Western Europe $105.40 $103.20 $101.23 United States $126.23 $119.92 $117.52

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