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Decision Management Coursework

Decision Management Coursework 10

DecisionManagement Coursework

By:

  1. Net Present Value Computations

Project A

Year

Operating Costs

Revenue

Scrap Value

Income before tax

Tax

Net Cash Flow

PVIF

Present Value

0

800000

0

0

-800000

&nbsp

-800000

1

-800000

1

65000

275000

0

210000

0

210000

0.909090909

190909.0909

2

75000

302500

0

227500

63000

164500

0.826446281

135950.4132

3

75000

332750

0

257750

68250

189500

0.751314801

142374.1548

4

100000

366025

0

266025

77325

188700

0.683013455

128884.639

5

100000

402627.5

80000

382627.5

79807.5

302820

0.620921323

188027.395

6

&nbsp

&nbsp

&nbsp

&nbsp

114788.25

-114788.25

0.56447393

-64794.9746

NPV

-78649.28162

NPV

-78000

Project B

Year

Operating Cost

Revenue

Net Cash Flow Before Tax

Capital Allowance

Investment

Taxable Revenue

Corporation Tax

Net Cash Flow

PVIF

Present Value

0

500000

0

-500000

0

500000

-500000

0

-500000

1

-500000

1

95000

275000

180000

100000

400000

280000

0

280000

0.909090909

254545.4545

2

95000

302500

207500

80000

320000

287500

84000

203500

0.826446281

168181.8182

3

110000

332750

222750

64000

256000

286750

86250

200500

0.751314801

150638.6176

4

110000

366025

256025

51200

204800

307225

86025

221200

0.683013455

151082.5763

5

95000

402627.5

307627.5

40960

163840

348587.5

92167.5

256420

0.620921323

159216.6457

6

&nbsp

&nbsp

&nbsp

&nbsp

&nbsp

&nbsp

104576.25

-104576.3

0.56447393

-59030.5668

NPV

324634.55

NPV

324000

  1. Sweatshops

By definition,sweatshops can be defined as workplaces that are uncomfortable,socially opposed and less rewarding to the employees. Labor costmanagement makes most of the industries resort into sweatshops. Thisis done in order to acquire labor at reduced costs. In return,profits margins are increased under constant revenue conditions. Mostof opponents of the concept of sweatshops, however, draw theirdefenses from moral theories and policies. They mostly view it as anexploitative approach to sourcing labor for the organizations.

Employees’ viewon Sweatshops

Working insweatshops is mostly out of choice. According to Zwolinski (2011, p.669) the people employed in sweatshops choose to do so. It is as aresult of their life conditions and work qualifications that theychoose to do so. In spite of the fact that most of the social andethical theories are in opposition of the concept of sweatshops, themere acceptance by employees to work under such work conditions hasbeen used as a basis for supporting the idea. Over the years, therehave been several movements in opposition of the idea of sweatshops.

Employees do notlike the work conditions to which they are exposed. In order to earnsalaries and wages, however, they have to abide by the policies andconditions set by the employers. With low salary levels, theemployees strive to work even harder to increase on their output asthis is reflected in their periodic payouts. Therefore, the employeesare put in a position in which they have no second choice other thanto work under the set harsh environment and conditions.

Analysis from anEconomics Perspective

Economics ofsweatshops can be analyzed from multiple dimensions. In terms ofwages, the highest wage that a worker is entitled to fully depends onlabor productivity. The minimum wage accepted by the worker is alwayshigher than the next available employment option. Therefore,employees in sweatshop make their own decisions to get employed insuch working conditions. In the view of Powell and Skarberk (2005, p.2), wage rates in the sweatshops are lower not only due to lack ofalternatives for employees but also due to low productivity levels.As a result of the wage rates, most of the anti-sweatshop protestshave been advocating for higher pay among the employees working inthese conditions.

Employees aresubjected to poor working conditions, but in their own view, this isat least better off than the alternatives they had. Elements ofrefusal and non-compliance are, therefore, limited or do not exist atall. There is a difference between child labor and sweatshops in thatthe concept of child labor brings in the age factor (Sudbury,2012, p. 66). It is, however, possible to have child labor insweatshops in cases where underage employees are recruited underthese conditions. In most instances, workers are locked in until agiven output level is attained. Some workers operate on night shiftbasis and this is an approach by the companies involved to generatethe target output within the shortest duration.

Arguments againstSweatshops

The firstargument against sweatshops is that employers reward workers withvery low wages that are not commensurate to their work output(Zwolinski, 2006, p. 11). In most cases, the wages are paid out byMultinational Corporations that operate in Third work nations. Theemployers do not offer competitive wage rates due to the perceptionthat the workers have no better alternatives to the present jobconditions. Consequently, they have to abide by the workingconditions and accept the payment. The fact that the wages offeredare not competitive makes most human rights activists and ethicaltheorists oppose the move by employers to incorporate sweatshops intheir premises.

Sweatshops ignorehuman dignity and rights. This is according to Immanuel Kant’sethics (Arnold &amp Bowie, 2012, p. 609). Given the workingconditions, employees are exposed to multiple health risks. In theevent of any sicknesses, the wages earned cannot fully support theirmedical expenses. This puts their lives in danger and the employershardly cater for such costs. Ethically, therefore, most of theopponents view sweatshops as means of denying people of their humandignity. Exploiting their desperateness is a way of making use oftheir lives in a way that is inhuman.

The Case ofGreen, Plc

Reduction inrevenue and profits for Green Plc makes it necessary for actions tobe taken in order to restore operational levels and ensure thatproduction is maximized. One of the approaches to maximizing profitsis through cost reduction. Different cost reduction measures can betaken by the company in order to raise substantial revenue at lowcosts. Sweatshops can be an option with a view to recruitingemployees from the third world country in order to reduce costs. Theuse of sweatshops, however, should be a matter of concern for Green,Plc due to a number of reasons.

To begin with,sweatshops will lead to sourcing of cheap and ready labor especiallyfrom the third world country. This will generate high revenue atminimal costs. However, the image of the company may be tainted as aresult of possible instances of lawsuits due to the social oppositionof the concept of sweatshops. Human rights activists are likely toblame the company for the challenges that employees go through inworking under unhealthy conditions and with minimal pay.

Other thanmaximization of revenue, the company would gain access to readylabor. In the third world countries, unemployment is seen as a majorchallenge. Therefore, candidate would be exposed to two conditionsunemployment or sweatshops employment (Hartman,2013, p. 101). The better off option is to work in Green Plcunder the conditions set. This makes it possible for Green Plc toimplement the policy and acquire as many employees as iscost-effective to their operations. The employees’ bargaining powernearly dies in this case and the company has an upper hand in settingthe wage rates. Several employees mean higher work output on anaggregate basis. However, the output may only be quantitative and notqualitative. Most of the workers would be unskilled in handling theoperations that they are meant to perform. Production of low qualityequipment in under low costs makes the company lose its market base.Customers’ tastes and preferences shift with innovations that takeplace in the contemporary market operations. By choosing to fullyconcentrate on sweatshops as an approach to attracting ready labor,the company would compromise on quality.

Thirdly,sweatshops can be a matter of concern for Green, Plc because thebenefits could only be short-term. Given that the government in thehost country has been blamed for not protecting human rights, thereare high investment risks in choosing the designated country. Inspite of the fact that the target country has put in place policiesto attract foreign investments, the claims of not being keen on humanrights poses risks to companies using sweatshops and child labor asmans of acquiring labor. With time, therefore, the internationalcommunity would intervene and most of the companies could be sued oreven shut down due to non-compliance to the support of human rightsand labor laws.

In nutshell,therefore, using sweatshops is a concept that is currently undercriticism ethically, socially and from an economic perspective. Eventhough it leads to minimal costs and high output, the risks ofinvesting in such a policy are very high. The reputation of a companyand its goodwill often get tainted due to claims on unethicality inits operations. Several lawsuits can be filed against such aninstitution and this interferes with the operations taking placewithin it.

  1. Report to Mr. Jacob

An appraisal ofinvestment options A and B leads to recommendation of plan B. In thecase of B, the net present value i. As a result, the investmentoption promises higher returns compared to A. For option A, capitalallowances act as means of increasing the revenue margins to anextent that the tax deductions to not significantly affect the profitlevels per year.

In recommendinginvestment plan B, however, measures have to be taken to mitigatepossible risks associated with cheap labor options. Due to theconcerns already put across by international and non-governmentalorganizations over human rights’ violation, the employment policyadopted by Green, Plc has to be in line with the moral, legal andethical policies from an international community point of view.

On the overall,investment plan B is the most appropriate for Green Plc from thefinancial viewpoint and this would possibly lead to achievement ofthe target production and revenue level compared to A. Green, Plc canbe sustaining its operations through cost reduction initiatives andthe revenue-friendly policies implemented by the host government asthis leads to a projected high revenue generation. The company,however, has to carry out a feasibility analysis in addition tocapital appraisal in order to ensure that the investment risks areminimal.

References

Topof Form

Arnold, D.G. &ampBowie, N.E. (2012). Sweatshops and respect for persons. Availableathttps://philosophia.uncg.edu/media/phi361-metivier/readings/Arnold%20and%20Bowie-Sweatshops.pdf[Accessed on: November 15, 2016].

Hartman, L. P. (2013).&nbspRisingabove sweatshops: innovative approaches to global labor challenges.Westport, Conn. [u.a.], Praeger.

Powell, B. &ampSkarbek, D. (2005). Are “Sweatshops” bad for third worldworkers? Economic Education Bulletin, vol. 45 (4): 1-6. Availableathttps://www.aier.org/sites/default/files/Files/Documents/Research/3691/EEB%204.05%20-%20Sweatshops.pdf[Accessed on: November 15, 2016].

Sudbury,V. L. (2012).&nbspSweatshops inparadise: a true story of slavery in modern America.

Zwolinski, M.(2006). Sweatshops-definitions, history and morality. SanDiego CA: University of San Diego. Available athttp://home.sandiego.edu/~mzwolinski/Sweatshops_essay_web.pdf[Accessed on: November 15, 2016].

Zwolinski, M.(2011). The ethical and economic case against Sweatshop labor: Acritical assessment. Journal of Business Ethics, DOI10.1007/s10551-011-1058-8.