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Superior Grain Inc. - Essay Example
This report was created for Superior Grain Elevator Inc., as requested by the management. The company operates a port facility in Thunder Bay, Ontario, with two wharves for the operation of loading ships. …
Based on the analysis of the historical data and projected data for the upcoming year, it would be a mistake for Superior Grain to rely on the volume of shipments allotted from the Polish contract to cover the costs of building the third wharf with the expectation of 20% profit. It is apparent from the statistics that the addition of the third wharf would decrease the demurrage charge; however, there is a negative net present value (NPV) that indicates the company should not build the third wharf. Even though, there is a negative NPV for the company, according to our five-year analysis, Superior Grain Elevator could still consider building the third wharf. Because of the 3 factors detailed below, Superior Grain Manager, Mike Armstrong, needs to consider building the third wharf. By building the third wharf the waiting time will be dramatically decreased, and customer satisfaction will also increase. After the contract is over the number of ships will go back to 115 with the savings of more than $100,000 per year. There is always a possibility within the next 2 years for the company to get a new contract which it will be prepared to handle. Therefore by building the third wharf the company will be able to benefit from it.