Question

Boxwood Company is a wholesale plant nursery that is considering implementing two CSR initiatives. Information about these initiatives is summarized as follows:

Replace old greenhouse fans with new energy-efficient fans:
Old greenhouse fan electricity consumption per unit	800	watts per hr.
New energy-efficient greenhouse fan electricity consumption per unit	500	watts per hr.
Number of units	80
Cost of each new unit	$750
Cost of replacing each old unit with new unit	$100
Operating hours per day	8
Operating days per year	180
Metered utility rate per kilowatt-hour (kwh)*	$0.10
*Note: A kilowatt-hour is equal to 1,000 watts per hour.

Replace gasoline-powered ATVs with electric-powered ATVs:
Number of ATVs	15
Cost of new electric-powered ATV per unit	$24,000
Fuel, repair, other cost savings per ATV per hour of use	$1.70
Operating hours per day per ATV	5
Operating days per year per ATV	270

a. Determine which performance perspectives each CSR initiative would best fit under on the balanced scorecard.

  CSR initiatives best fit under the internal processes performance perspective.

b. Determine the initial investment cost of each initiative.

Replacing old fans initiative: $

Replacing ATVs initiative: $

c. Determine the yearly cost savings of each initiative.

Replacing old fans initiative: $

Replacing ATVs initiative: $

d. Determine how many years it will take for each initiative to pay off its initial investment cost. Round your answers to two decimal places.

Replacing old fans initiative:

Replacing ATVs initiative:

e. Assuming that the new fans have an estimated useful life of 25 years and that the ATVs have an estimated useful life of 8 years, determine which initiatives should be adopted.

a. The project of installing new fans can be adopted.

b. The project of installing new ATV’s can be adopted.

c. Both the projects of installing new fans and ATV’s can be adopted.

d. The project of new fans can be adopted and ATV’s can be rejected.

Answer 1

Answer :

(a). First initiative is for qualitative performance perspectives and second initiative cost and energy efficient. First initiative is more fits under internal performance perspectives.

(b). Cost of replacing old fans initiative - (80*$100 = $8000+80*$750 = $60000)$61000

Cost of replacing old ATVs initiative - 15*$24000 = $360000

(c). Cost saving for replacing the old fans =(800 -500 watts per hour)*(80 units)*(8 hours per day)*(180 days in a year)*($.10/1000) = $3456 (we divide $.10 with 1000 as this is saving for one kilowatt but the savings is in watt)

Cost saving for replacing old AVTs initiative -(15 units)*($1.70 per hour savings)*(5 hours per day )*(270 days )= $34425

(d). Years to pay off its initial investment

Replacing old fans 61000/3456 = 17.65 years

Replacing old ATVs -360000/34425 = 10.46 years

(e). Correct answer is option (d), Adopting replacing old fans as its pay back period is 17.65 years and it will exist for 25 years and rejecting ATVs initiative as its pay back period is 10.46 years and life is 8 years. ATVs are creating loss and new fans are profiting.