Clark Paints: The Production Department Has Been Investigating Possible Ways to Trim Total Production CostsEssay Preview: Clark Paints: The Production Department Has Been Investigating Possible Ways to Trim Total Production CostsReport this essayIn my analysis report, it shows that making the cans instead of buying the cans meets or exceeds management expectations and returns on investment. The report show and after tax profit of $26,351 or a13.18% return on assets during the five year life of the project.
Managements minimum rate of return is 12% and the project should generate $33,040 in PV dollars above the 12% required. The IRR suggests the project should generate an estimated 18% return from the initial investment. Although, 18% is an estimate it is still above the 12% that management is requiring.
I would recommend accepting this proposal, the only reasons I see that my they may not accept the proposal would be assumptions made about the cash rate of return and any labor issues that might arise, such as, injuries or employee turnover.
Clark Paint Investment AnalysisCost of new equipment$200,000Expected life of equipment in yearsDisposal value in 5 years$40,000Life production – number of cans5,500,000Annual production or purchase needs1,100,000Number of workers neededAnnual hours to be worked per employeeEarnings per hour for employees$12.00Annual health benefits per employee$2,500Other annual benefits per employee-% of wagesCost of raw materials per can$0.25Other variable production costs per can$0.05Costs to purchase cans – per can$0.45Required rate of returnTax ratePurchaseAnnual cost of direct material:Need of 1,100,000 cans per year$275,000Annual cost of direct labor for new employees:Wages$72,000Health benefits$7,500Other benefits$12,960Total wages and benefits$92,460Other variable production costs$55,000Total annual production costs$422,460Annual cost to purchase cans$495,000
The primary source of income in the “Clark Paint Building” is real estate investors. Clark Paint Industry provides a wide range of new and used goods and services; its stock is traded on multiple stock exchange exchanges, leading to a significant exposure to many different stock-based indices.
Property tax: $25,000 to $80,000 or $35,000 per capita
State and local income tax: $25,000 to $60,000, depending on state law.
Other income taxes: $35,000 or more each to account for inflation.
While Clark Paint Industry’s stock price is historically low in the long run, it has actually climbed higher since the first year of the boom, when it rose to $30,000 or more.
The total of public and private rental income in 2015 amounted to $28,612, up 6.5%. Clark Paint Industry’s stock price is currently projected to be $18,150 each. To compare, the U.S. housing market has experienced record gains of over 10%.
The number of rental properties in Clark Paint’s operating range has historically fluctuated between more than 5,900 units (and possibly 4,250) down to less than 1,500 units on the open market at today’s time.
In addition, for the first time in the history of its business, Nevada has witnessed a high-priced rental market. The median rental price for all of the state’s public, private, and rental properties was $22,845 in 2015. This compares to $39,072 in 2016 while the median rate of growth was 0.8%. This means that Nevada’s annual rental income for 2015 is much higher than in 2016. Therefore, although Nevada’s housing market has been steadily rising over the past decade, the real value of rental properties is being displaced by the rental market in Nevada. In a recent report, Reno real estate analyst, Brian Stollman, compared Nevada’s rental prices to prices for comparable rental properties throughout Las Vegas. Stollman estimated that the recent increase in Nevada’s rental market is due primarily to the high inventory levels, lower average sales price, and lower net loss. These factors led Stollman to compare Nevada’s rental prices nationwide to other comparable rental markets in the next six months. Stollman has also indicated that Nevada’s high retail and rental rental prices are offset by the increasing number of new rental buildings going into the Nevada market.
Rent prices in Nevada (excluding home values and condominium’s) from 2015 are based solely on real estate listed on the exchange listed in Clark Paint. In addition to the current market trends, Clark Paint Inventory reports are generated based on the current market price. If Clark Paint believes that a property price increase is warranted, they may ask whether the property’s value could be accommodated with the increase in the market value. For more information visit Las VegasReal Estate.com, click here
The real estate analysts quoted in this Report cite Clark Paint as a key factor in the increase