Costa Rica Presentation

Your manager has just told you that your last assignment was a hit with the board of directors, and the board is almost convinced that you will be promoted. He also explains that the board has sent him the next assignment for you to complete and pass. With that in mind, he explains that you must prepare a presentation for the board of directors show the rationale for locating the new production plant for men's business suits in Costa Rica instead of in the United States.

Costa Rica:

The Costa Rican government will waive property taxes on the manufacturing plant for 15 years.

Costa Rica has a political and economic climate that is friendly to U.S. business.

Shipping products from Costa Rica is greatly aided by the country's modern infrastructure and use of the English language.

Costa Rica has a long-standing, 150-year-old democratic government.

The cost of labor is 35.33% of the prevailing U.S. labor rate.

Estimates of operating income and expenses are attached within the Pro Forma Income Statement below.

Pro Forma Income Statement: Costa Rica Manufacturing Plant

All revenues and expenses stated in U.S. currency:

Net Sales $5,000,000
Cost of Goods Sold $3,500,000
Gross Profits $1,500,000
Operating Expenses:
Sales and XX Expenses $250,000
General and Administration $350,000
Depreciation $150,000

$750,000
Operating Income: $750,000
Interest Expense: $50,000
Before Tax Income: $700,000
Income Tax (40%): $280,000
Net Income: $420,000