Which location provides Polaris the greatest cost advantage? Calculatethe NPV of the three locations using a 10% discount rate.
Greatest Cost Advantage Location (NPV of 3 Locations at 10%)
The three different countries that were looked at were China, Mexico, and the U.S. Each of these countries were evaluated to determine which would make the best location. China had the lowest labor costs and the U.S. had the highest. The information showing this is below:
Monthly Wages
China – $2,016
Mexico – $4,384
United States – $5,824
As you can see out of the three countries China was able to provided the greatest cost advantage because of how low the monthly wages were. Also important to note are the associated costs for capital expenditures, equipment moving, and starting up manufacturing in the host country. These one time costs are shown below:
One Time Costs
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