FINANCIAL MANAGEMENT

Financial Management

Table of Contents

EXECUTIVE SUMMARY3

INTRODUCTION4

CAPITAL COSTS5

DEPRECIATION COSTS6

ANALYSIS7

The Objective of the Annual Incentive Plan7

Participants7

Plan Changes8

Entire Agreement8

Elements of the Plan Bonus Eligible Earnings8

Target Bonus8

Company Performance Factor9

Individual Performance Factor9

Bonus Payments9

Transfers9

Employment at will10

PROFIT IMPACT10

RECOMMENDATION13

REFERENCES14

APPENDIX15

Exhibit 115

Exhibit 215

Exhibit 316

Executive Summary

Lewis Driscoll faces a number of challenging property, plant, and equipment issues. If he purchases a new crane, what ancillary costs should be capitalized? What depreciation method should he choose? How should he account for disposal options for the old forklifts? Not only will his decisions affect current and future profitability, but they may also impact others' bonuses based on company performance.

Financial Management

Introduction

Driscoll Lewis was enthusiastic about the proposal that had just crossed his desk. As logistics Delta Cargo Manager, located near the mouth of the Mississippi River, Driscoll and his team were responsible for loading and unloading barges with a wide variety of goods shipped to standard shipping containers. Delta Cargo was an operating division of Delta Transport, a company that provided a lot of transport services in the region of the Gulf Coast. With 10 forklifts for loading and unloading of barges, employees of Delta Cargo operate throughout the day. Sales representing the company JM Crane have recently shown a new crane Delta allowed to replace your forklift, improving efficiency and speed.

Although it sounded like a great idea, Driscoll began to wonder if corporate governance is adopted expenses. The loading crane that would allow more efficient processing, as the first company to use technology, Delta has an advantage over many competitors in the freight business of the Mississippi River, which handles 175 million tons per year. Crane Investment undoubtedly affects the profitability of Delta as the forklift almost fully depreciated and the new crane would involve a considerable capital investment. Driscoll reminded the business management class was sponsored by Delta after the last promotion. How much depreciation Delta incurred by this new investment? But he did very matter such as depreciation benefits affected, but not a real cash outflow? Your selection a particular line-line depreciation, double declining balance, sum of years digits, or tax-based accelerated affect the bottom line of the delta and the total cost? Driscoll also knew that the maintenance of the forklifts would be unnecessary, since cranes capacity is much greater than Delta needs.

Capital costs

Driscoll began evaluating the proposal, the same crane; a new BH115-United Industries was a real beauty: a hydraulic crawler crane of 115 tons with a height of 150 feet, a 70-foot tubular arm and a Cummins diesel engine quiet.

Priced at $ 2.1 million, would be sent in parts of Savannah, Georgia, and another $ 50,000 in shipping, assembly and handling costs. Driscoll budgeted in their calculations that Delta could defray the mounting costs to have their own dock workers assemble the parts of the crane, with a saving of about $ 20,000, about what Delta could pay the stevedores for loading functions normal (Pratt, 63). As dockworkers occasionally expected, Driscoll sees this as a real cost savings. Management would require a staff of Delta Cargo ...