Cost and Benefit Analysis with Board Recommendation for Kardell Paper Company

Read the Ethics Case, The Kardell Paper Co., on pages 213–215 of your text.

Using the Modified 5-Question Approach, analyze the ethicality of the decision to (or not to) incorporate the new technology and make a fully supported recommendation to the Board of Directors. Supplement this analysis with a Cost-Benefit Analysis (CBA) table.

You will need to reference your CBA in your recommendation to the Board. Make sure you thoroughly detail your recommendation with reflections on the consequences of the decision, whether the decision is fair to all, and whether the decision demonstrates the virtues expected of the Board of Directors, taking relevant codes of conduct into consideration, and the company as a whole in terms of social responsibility.

The following information and assumptions should be used to complete the Cost-Benefit Analysis:

• Annual Revenues from the mill average 625 million.
• Profit margin from the mill is approximately 11%.
• Implementing the new technology would take two full years. The first year, the company would operate at 65% capacity (assume the company could maintain the 11% profit margin during reduced operations). During the second year, it would need to be completely shut down. After the two year period, the mill could reopen and operate at pre-implementation levels.
• Approximate cost of litigation including medical costs for all affected by the contamination, environmental sanctions, legal and court costs, victims’ pain & suffering, and several other items is 1.7 billion. Estimate present value of future costs at 20%.
• The company would spend approximately 4 million in hiring, onboarding, and training new employees after reopening as a result of several of their existing employees having to seek employment elsewhere during the shutdown.
• As a result of the layoffs and shut down, the local economy would suffer greatly. The community would be forced to implement a 3 year tax on all local business profits of 5%. The tax would be enforced for 3 years beginning after the reopening of the mill. (Assume pre-implementation profit margins when calculating this and exclude all other costs and taxes when preparing this analysis.