Payment of Duty and Duty-Related Carrying CostListon, Inc., owns a factory located close to, but not inside, a foreign trade zone. The plant imports volatile chemicals that are used in the manufacture ofchemical reagents for laboratories. Each year, Liston imports about $16,400,000 of chemicals subject to a 30% tariff when shipped into the United States.About 15% of the imported chemicals are lost through evaporation during the manufacturing process. In addition, Liston has a carrying cost of 8% peryear associated with the duty payment. On average, the chemicals are held in inventory for 9 months.Assume that Liston is considering building a new plant inside a foreign trade zone to replace its chemical manufacturing plant.Required:1. How much duty will be paid per year by the factory located inside the foreign trade zone?4,182,000 ✓2. How much in duty and duty-related carrying costs will be saved by relocating inside the foreign trade zone?250,920 X

Data given:Carrying cost per year=8%Average holding period=9 months.

Answered: Payment of Duty and Duty-Related…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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