The following information and assumptions should be used to complete the Cost-Benefit Analysis:
- Annual revenues from the mill average 750 million.
- Profit margin from the mill is approximately 12%.
- Implementing the new technology would take 2 full years. The first year, the company would operate at 55% capacity (assume the company could maintain the 12% profit margin during reduced operations). During the second year, it would need to be completely shut down. After the 2 year period, the mill could reopen and operate at pre-implementation levels.
- Approximate cost of litigation including medical costs for all affected by the contamination, environmental sanctions, legal and court costs, victims’ pain and suffering, and several other items is 1.8 billion. Estimate present value of future costs at 20%.
- The company would spend approximately 5 million in hiring, onboarding, and training new employees after reopening as a result of several of their existing employees having to seek employment elsewhere during the shutdown.
- As a result of the layoffs and shut down, the local economy would suffer greatly. The community would be forced to implement a 3 year tax on all local business profits of 5%. The tax would be enforced for 3 years beginning after the reopening of the mill. (Assume pre-implementation profit margins when calculating this and exclude all other costs and taxes when preparing this analysis.
Supplement this analysis with a Cost-Benefit Analysis (CBA) table.
