Hardwick Corporation manufactures fine furniture for residential and industrial use. The demand for the company’s products has increased tremendously in the past three years.
Hardwick Corporation manufactures fine furniture for residential and industrial use. The demand for the company’s products has increased tremendously in the past three years. As a result, the company wants to expand its production facility by building a warehouse facility in either Cleveland, Ohio or Alexandria, VA. The company is considering a 10-year expansion project that requires an initial investment of $2.0 million for the Ohio project and $2.55 million for the Virginia project. The variable cost of making each piece of furniture is $350. The price per piece of furniture depends on the size, weight, and quality of wood used but the average price is $1,350. The fixed cost of the project is $2 million. It is the accounting policy of the company to depreciate fixed assets using straight-line method over the life of the project, after which the assets will be worthless. The company faces a tax rate of 35%. The finance department of the company has prepared the cash flows from the projected sales and expenses figures for the two projects.
OR