Your manager explains that you must prepare a presentation for the board of directors discussing the rationale for locating the new production plant for men's business suits in Costa Rica instead of in the United States.
Design a PowerPoint in which you address the major reasons behind the Costa Rican strategy. For full credit, you must address and use the following salient points in your presentation:
- The Costa Rican government will waive property taxes on the manufacturing plant for 15 years.
- Costa Rica has a political and economic climate that is friendly to U.S. business.
- Shipping products from Costa Rica is greatly aided by the country's modern infrastructure and use of the English language.
- Costa Rica has a long-standing, 150-year-old democratic government.
- The cost of labor is 35.33% of the prevailing U.S. labor rate.
- Estimates of operating income and expenses are attached within the Pro Forma Income Statement below.
Pro Forma Income Statement: Costa Rica Manufacturing Plant
- All revenues and expenses stated in U.S. currency:
Net Sales : $5,000,000
Cost of Goods Sold : $3,500,000
Gross Profits : $1,500,000
Sales and XX Expenses : $250,000
General and Administration : $350,000
Depreciation : $150,000
Operating Income: $750,000
Interest Expense: $50,000
Before Tax Income: $700,000
Income Tax (40%): $280,000
Net Income: $420,000