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Assessing Manufacturing Capital Investments in the Global Market

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2013 ASEE Annual Conference & Exposition


Atlanta, Georgia

Publication Date

June 23, 2013

Start Date

June 23, 2013

End Date

June 26, 2013



Conference Session

State of Manufacturing

Tagged Division


Page Count


Page Numbers

23.212.1 - 23.212.15

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Paper Authors


Rex C Kanu Ball State University

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Dr. Rex Kanu is the coordinator of the manufacturing engineering technology program in the Department of Technology at Ball State University in Muncie, Indiana, where he teaches courses in plastics materials and processing.

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Assessing Manufacturing Capital Investments in the Global MarketManufacturing activities are becoming more global in recent times because of the need formanufacturers to be closer to the sources of raw materials and/or to the markets of themanufactured products. Oftentimes, both sources of raw materials and the markets are located inforeign countries. Thus, as a consequence of rapid expansion of global economic activities someUS universities are now requiring their incoming freshmen to pass a course in foreign languagebefore they graduate. Given this scenario, it seems appropriate to introduce students in amanufacturing engineering technology program to tools they may need to evaluatemanufacturing projects in the global manufacturing market. These projects may have inherentrisks or uncertainties emanating from political instabilities in the countries where the projects arelocated, or from unproven technologies (such as deep-sea drilling of crude oil), or from theshortage of skilled labor. Traditionally, capital projects with uncertainties have been evaluatedusing tools such as the net present value (NPV) capital asset pricing model coupled with asensitivity, break-even, or scenario analysis. These tools mainly examine the variability inprojected cash flows of projects with uncertainties. Alternatively, with adjusted net presentvalue (ANPV) capital asset pricing model, each cash flow stream in a project is assigned anexpected rate-of-return that is commensurate with the risks of the cash flow. This allows for thedecoupling of individual cash flow stream (e.g., capital outlays, revenue, taxes) and theirsubsequent proper evaluation rather than use a weighted rate-of-return as is done in thetraditional net present value (NPV) model, which is then augmented with a break-even or asensitivity analysis. In this study, ANPV was used to evaluate the economic viability of aplastics plant in a foreign country and the results compared with those of the net present value(NPV) model.The primary intent of this study was to exposure manufacturing engineering technology studentsto manufacturing activities in the international arena. To assess if this goal was achieved, surveywas administered at the beginning and at the end of the course to determine students’ learningoutcomes. The result of this study will be presented at the conference.

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