Avoiding or engaging in Strike
Assuming the minimum labor wage stands at $7.25 and each employee works 10 hours a day for 25 days a month. This would mean that at least each employee earns a minimum wage of ($7.25 ×10 ×25) = $1812.5 per month. However, in a negotiated labor minimum wage increase of 80 percent negotiated at 40 percent, but at least 10 percent below competitors, it would mean that the company would arrive at a 30% wage increase; this would be 30% of 1812.5. Therefore the labor wage increase would be $543.75 per month; this means that the company would have saved 50% of the desired labor increase, which would amount to $906.25 per month. On an annual basis, the company would have saved at least ($906.25 × 12) = $10,875 per employee. For a period of five years, the company would have made a savings of ($10875 × 5) = $54,375 for five years per employee.
One of the most important issues that would be considered at the negotiation table is the fact that the strike had significant negative impact on the company’s productivity by cutting the productivity into half. It would also be important to consider that the company would be compelled to hire more workers because of the reduced productivity. In this regard, the company would suggest that an increment of the employees’ wages should be performed in a gradually manner that would allow the company recover from the losses incurred during the strike. Considering that the company would be compelled to hire more workers to facilitate a recovery from the losses experienced, it would be pertinent to inform stakeholders that any adjustment in regard to payments or remuneration should be made in a manner that enhances a win-win form of agreement. That is, in a manner that would not hurt the financial status of the firm.
The Purchase of Plants in the Last Rounds of Production
Making Investment
I think I would make the investment; firstly, it is important to consider that the acquisition of 200 units in the 7th round would not affect the production and the sale of 400 units in the 8th round. Besides, it would be important to consider the profit margins that would be acquired or achieved in the 7th and 8th round. In both cases, the company would still record tremendous sales, accompanied with attractive profits. I believe that the objective of many companies or the ultimate goals is to record highest levels of income. Consequently, the investment in round 8 would be funded by a bond issued at 14%; this means that the company would not experience financial constraints in the purchase of equipment or plant in the 8th round.
Cash Outflow and Cash Inflow on Single Capacity Unit
Cash Outflow on the Single Unit Capacity;
(Cost per Unit + the Interest paid per Unit); cost per unit is $34 and the interest paid per unit is 14%. Therefore cash outflow per single unit capacity ($34) + (14% of $34) = ($34 + $4.76); thus,
Cash Outflow = $38.76
Cash Inflow for the first shift and Second Shift;
Cash inflow for the first shift could be acquired from the $ 6.8 million bond that is issued at an interest rate of 14 percent. However, for the second shift, the cash inflow could be generated from the sales and part of the $6.8 million that was issued at an interest rate of 14 percent per single unit capacity.
