Torque engine company is considering opening a plant in china. it will cost $3,500,000 to set up the plant and $800,000 to train employees. an additional $160,000 will be spent to build relationships with the local suppliers. the company anticipates gross profit of $4,500,000 from this new plant. do the benefits outweigh the costs or do the costs outweigh the benefits, and by how much?

Question

Amirah Choi

Business

23 May, 02:40

Torque engine company is considering opening a plant in china. it will cost $3,500,000 to set up the plant and $800,000 to train employees. an additional $160,000 will be spent to build relationships with the local suppliers. the company anticipates gross profit of $4,500,000 from this new plant. do the benefits outweigh the costs or do the costs outweigh the benefits, and by how much?

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Alexandria Cowan · Answer 1

In the given problem the company is considering opening a plant in China which shall provide the anticipated gross profit of $4,500,000. The costs of the project include

$3,500,000 to set up the plant and $800,000 to train employees, and an additional $160,000 to build relationships with the local suppliers.

So the total cost of project is 3,500,000+800,000+160,000 = $4,140,000

Now the net benefit from the project shall be 4500,000 - 4140,000 = $360,000

Hence we can say that the benefits outweigh the costs by $360,000.