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ECONOMICS EXAM ASSIGNMENT

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Question;Name _________________________________________ Last 4 digits of your A# _______________Use the abridged article about McDonald?s on p. 7 to answer the following questions: Explain the cost issues that McDonald?s is facing. (4 points)Explain the demand issues that McDonald?s is facing. (4 points)xplain the roles played by the price elasticity of demand and the income elasticity of demand in the menu decisions McDonald?s is contemplating. (6 points)Why/how is the McRib helping McDonald?s profits? (4 points)Use the abridged article about Uniqlo on p. 8 to answer the following questions: (4 points each)Fast Retailing includes a presence in China. What learning economies might it already have in China?Fast Retailing now has 5 stores in the US, with the newest one in San Francisco. What will it have to learn to be successful in San Francisco?Use the abridged article about Tootsie Roll, Inc. on p. 9 to answer the following questions: (4 points each)Describe two ways that buying Andes Mints would have provided economies of scale for Tootsie Roll.Describe two ways that buying Andes Mints would have provided economies of scope for Tootsie Roll.Use the abridged article about Hewlett-Packard on p. 10 to answer the questions below: (6 points each)Which individuals mentioned in the article who you believe are both principals and agents? Explain why you think that.Describe two major agency issues at Hewlett-Packard.Describe two practices that could/should have been set up better within Hewlett-Packard to mitigate its agency problems. Why is a corporation more likely to have agency issues than a sole proprietorship or a partnership?Use the abridged articles about the GSK-HGS merger on p. 11 to answer the following questions: What does GSK expect to benefit from this merger? That is, explain what special assets HGS brings to the merger that add value to GSK. (6 points)In what way(s) does this merger entail vertical integration? (4 points)What does the term ?relationship-specific asset? mean? (4 points)Which of these HGS assets [from (a) above] are already relationship-specific assets? (4 points)GSK must believe that the discounted present value of this merger is in excess of $3.00 billion in order to buy HGS. What else must be true for GSK to decide to buy HGS? Explain. (4 points)Use the abridged article about Novelis and Alcoa. on p. 12 to answer the following questions: (5 pts. each)Select one of these firms and explain how it benefitted from their affiliation.Select one of these firms and explain how it benefitted from ending their affiliation. Choose either Alcoa or Novelis and describe how, hypothetically, the firm you selected may have been earning quasi-rent from their affiliation.m (bauxite) mines are accessing ore that is more pure than mines held by any other aluminum mining company. Would you expect Alcoa to be earning rent? Explain.EXTRA CREDIT (6 points each)A. Create a sequential game tree for events described in one of these two articles: the McDonald?s article, p. 8, starting with a decision made by Burger King to keep its dollar menu, then a choice of possible decisions made by McDonald?s, and the possible outcomes.ORThe GSK and HGS articles, p. 12, starting with a decision made GSK, then a choice of possible decisions made by HGS, and the possible outcomes.B. Select a concept from Chapter 1, 2, 3 or 5 on which I failed to test you, and use any one of the articles you didn?t use in (A) above to illustrate your understanding of that concept.Amid Falling Profit, McDonald's to Revisit 'Dollar Menu,' October 19, 2012, by Annie GasparroMcDonald's Corp. reported a 3.5% decline in third-quarter earnings as sales slowed more dramatically than expected because of a sluggish economy and a disappointing marketing campaign.McDonald's predicted its sales and earnings growth will "remain pressured" over the next few quarters by the weak economy, and conceded that it needs to be more aggressive in advertising low prices.As the world's largest fast-food chain, McDonald's has touted its global scale and mix of both value-oriented and higher-priced menu items as key to enduring tough economic times. But the once-resilient restaurant operator isn't weathering the current market turbulence as well as it did the crisis of 2009 because the downturn is more widespread and competition is closing the gap."We face softening demand, heightened competition and rising costs in many of our markets," Chief Financial Officer Pete Bensen said. In a weaker economy, customers tend to stop getting extras like drinks and desserts and premium items like Angus burgers, which all offer higher profits to McDonald's. Plus, they may not go out to eat as frequently.McDonald's shares were down 4.5% to $88.72 in 4 p.m. composite trading Friday on the New York Stock Exchange, as Wall Street analysts were expecting an increase in per-share profit for the quarter, not a decline.Chief Executive Don Thompson said McDonald's move earlier this year to shift its marketing focus in the U.S. to the higher-priced and more profitable "Extra Value Menu" from the successful "Dollar Menu" didn't "resonate as strongly" with consumers."We're going back to talk of the Dollar Menu," Mr. Thompson said. He said the chain is losing momentum world-wide, with sales at restaurants open at least 13 months falling so far in October compared with the same time last year. Such same-store sales are a key indicator of restaurant chains' strength, and McDonald's hasn't seen declines by that measure since April 2003."It's been very rare that we've ever seen all of our major markets experiencing the impact of these kind of global economies at the same time," the CEO said. The restaurant chain, though, does expect sales for the whole quarter to improve, thanks in part to the debut in December of the McRib sandwich, which has a cult following in the U.S.The company hopes that focusing attention to its lower prices will attract more customers and gain their loyalty. This way, when the economy starts to improve, McDonald's will have a larger consumer base and more ability to raise prices. That was its strategy during the last recession, and it eventually helped McDonald's outperform competitors.But McDonald's initially said it was moving in that direction in July, and yet doing so didn't seem to boost its top line in recent months. In the third quarter, same-store sales rose 1.9% globally, compared with a consensus of 2.4% among analysts polled by Thomson Reuters."There is a lag when these adjustments are executed and when we see impact on our results," Mr. Thompson said. He added that regions where it launched value menus this year - like Australia, France and Japan - already have seen a sales boost as a result."Clearly, we'd love to be able to see more sales, and that will come in time, but right now it's about having more traffic and appealing to customers," Mr. Thompson said.The company has cautioned investors all year that its margins are being hit with the effects of higher food and business expenses, and lower consumer confidence, and that its rivals in the U.S. are turning up the heat with revamped menus and marketing campaigns.For the third quarter, McDonald's reported a profit of $1.46 billion, or $1.43 a share, down from $1.51 billion, or $1.45 a share, a year earlier. Revenue slipped 0.2% to $7.15 billion. Excluding currency fluctuations, revenue was up 4%.Analysts polled by Thomson Reuters had forecast earnings of $1.47 a share on revenue of $7.14 billion.By region, third-quarter same-store sales rose 1.2% in the U.S., 1.8% in Europe and 1.4% in the Asia/Pacific, Middle East and Africa region.Uniqlo Woos the World but Falters at Home, by Hiroyuki Kachi and Kenneth Maxwell, Wall Street Journal, 12 Oct 2012TOKYO -- Three years ago, the man who founded Uniqlo said he planned to make the Japanese casual clothing retailer the world's No. 1 apparel store chain by 2020, shooting for annual revenue of 5 trillion yen, equal to about $64 billion.On Thursday, Uniqlo parent company Fast Retailing Co. reported revenue already close to a fifth of ?Yanai's target, boosted by aggressive store openings across the planet, from China to the U.S., and marketing efforts defined by gleaming flagship stores, billboards touting minimalist styles at moderate prices, and cutesy ad campaigns featuring Maru, a Japanese cat whose YouTube videos have gone viral.But as Mr. Yanai chases his dream of overtaking bigger peers such as Spain's Inditex SA, Sweden's Hennes & Mauritz AB, and Gap Inc., opening as many as 300 new Uniqlo stores a year outside Japan, he must also act fast to tackle a comparative soft spot: Even as Uniqlo rolls out new stores overseas, it faces a decline in profitability in the domestic powerhouse from which it is launching the global drive. ?"I think Asia would provide us with the biggest business chance since the dawn of history," he said at a news conference Thursday, targeting 1,000 stores in China by 2020, and another 1,000 in other parts of Asia. "It is particularly a time like this recession that gives us business chances, because nobody [else] intends to open stores... and will provide us a greater chance to obtain skilled human resources."On Thursday, Fast Retailing reported that net profit jumped about 30% to 71.7 billion yen ($916.1 million) for the fiscal year ended in August on revenue that rose 13% to 926.7 billion yen on the backs of the company's trademark down jackets, $100 cashmere sweaters and colorful basics. Revenue for the current fiscal year is projected to rise 14% to 1.06 trillion yen.But the final quarter of the year was blighted by weak early summer sales at Uniqlo Japan stores, pushing the company into the red. That quarterly loss of 863 million yen meant it missed its own full-year profit target. Fast Retailing blamed unseasonable weather.For the just-ended fiscal year, operating profit margin at Uniqlo in Japan slipped to 17%, from the year-earlier ratio of 18%, and 21% in the 12 months ended August 2010. Retail industry watchers say one of the company's problems is that Uniqlo doesn't carry the cachet at home that it does overseas."Domestically, Uniqlo is ubiquitous and is known for its basic designs that are both low-priced and functional," said Ayako Homma, research analyst at Euromonitor International. "Internationally, the brand is positioned as a newcomer in most markets and is seen as a cool and fashionable export of Japan."A lack of hit new products at home. "While the company is well known for the 'Heat Tech' innerwear that was introduced in 2003, and has sold over 300 million items," said Euromonitor's Ms. Homma, "the company has not been able to introduce a new technology with similar popularity."For many businesses around the world, the current Uniqlo Japan operating margin would be considered more than healthy. But if Fast Retailing is to meet Mr. Yanai's goal through the massive organic growth planned, rather than via a major acquisition -- something the executive has said he is prepared to consider -- the company needs its cash generation machine to be in prime working order.Fast Retailing's share of the highly fragmented global apparel market stood at 0.6% -- double its size in 2007 -- ranking it seventh largest in the world, according to data from Euromonitor. Inditex, the home of the Zara chain, and H&M each had a share of 1%, while Gap's share was 0.9%. ?He now also is set building up the company's next world-wide "pillar": its ? chain called g.u., which is targeted squarely at younger women conscious of both fashion and budget. Priced lower than Uniqlo in Japan, g.u. has attracted attention by recruiting local stars like Harajuku street fashion princess Kyary Pamyu Pamyu to model in ad campaigns, and sales are rising. The first overseas g.u. store ? has been penciled in for around 2014.? Overseas store openings continue apace, most recently in San Francisco -- giving the company five stores in the U.S. The company has a vast program of hiring and training new managers to absorb growing pains. Mr. Yanai remains insistent that China will play an important part in Fast Retailing's future development, despite the recent political tensions between Tokyo and Beijing that have hurt Chinese sales of some Japanese products, particularly cars. ?Tootsies Secret Empire, by Ben Kesling, Wall Street Journal [New York, N.Y] 22 Aug 2012: B.1.? The 116-year-old company, run by one of America's oldest CEOs, has become increasingly secretive. ? Tootsie Roll shuns journalists, refuses to hold quarterly earnings calls, and issues crookedly-scanned PDFs for its earnings releases. The last securities industry analyst to maintain coverage of the company stopped last year because it was too hard to get information. ?The chairman and chief executive of Tootsie Roll is Melvin Gordon ? in his 90s who has headed the company for 50 years. He runs it with his 80-year-old wife Ellen, whose father started the company.Decades of acquisitions have given Tootsie Roll a product gallery of mostly antique -- though profitable -- candy brands, including Charleston Chew, Sugar Babies, Junior Mints, and Blow Pops, in addition to the company's chewy, brown namesake. Mr. Gordon likes to joke with visitors about the Tootsie Roll's robust shelf-life, and he and his wife have worked hard to ensure that the company stays out of the clutches of competitors. The Gordons control the company, primarily through their majority ownership of its powerful class B stock, each share of which is worth 10 votes to common stock's one vote.But in recent years, anemic growth and shrinking profit margins -- as well as the ruling couple's age and lack of any publicly disclosed succession plan -- has raised questions about Tootsie Roll's future. Revenue inched up 2% last year, to $528.4 million, while profit slipped by about a fifth to $43.9 million.Gabelli Funds LLC, and GAMCO investors Inc., run by activist investor Mario Gabelli, gobbled up shares in the company in 2008, when major candy company mergers were heating up, raising his stake to just under 6% from an initial holding of around 1% it had held for decades."We know at some point it makes sense for there to be a sale," said Gabelli analyst Kevin Dreyer. "I've always thought this is a business that is difficult to compete with much larger companies." ?The company's proxy statement in March lists [Mr. Gordon?s] age as 92?. The Gordons have given no hint that they intend to retire and no indication of health problems. "Their age is no concern," said Jerry Schmutzler, 70, who works the midnight shift in the boiler room of Tootsie Roll's Chicago factory. The company also has plants in four other states, as well as Canada and Mexico.With their control of Tootsie Roll comes perks. Mr. and Mrs. Gordon each get an official salary of $999,000 a year, which the company says is a cap on executive salaries for tax reasons. The pair together received total compensation of $7.6 million last year. That includes bonuses as well as $1.2 million the company spends annually for the Gordons' use of a company plane to visit factories and to commute between their home in Massachusetts and their Chicago apartment...? the company has a succession plan that has been shared with the board but declines to make it public. There is no public indication that the Gordons' four children have any interest in taking over management of Tootsie Roll. ?Under the Gordons, Tootsie Roll took off in the 1970s, acquiring Mason and Bonomo, maker of Dots gumdrops. ? In the '80s, Tootsie Roll acquired Charms, maker of Blow Pops, and in the '90s it bought brands including Sugar Daddy's and Junior Mints. In the early 2000s, the company added Andes Mints and Dubble Bubble to its catalog. In all, the company has nearly doubled sales in the last two decades without spending big money on advertising or getting distracted by unnecessary acquisitions."They stayed focused, bought commodities cheap, and spent money inside," said Howard Pines, founder of BeamPines, a human resources consulting firm, who consulted with the company in the 1980s."They didn't buy anything that didn't fit," Mr. Pines added, noting that the Gordons never acquired a subsidiary that couldn't "plug in" to the existing candy business.Candy industry buyouts have accelerated recently. In 2008, Mars Inc. bought Wm. Wrigley Jr. Co. with the help of billionaire Warren Buffett, creating the third largest private company in America?. In 2010, Kraft Foods Inc. acquired Cadbury PLC in a deal valued at over $19.5 billion. Hershey Co. last year bought Canadian confectioner Brookside Foods Ltd.While its operating profit margin has fallen by roughly half in the last decade, to 11% last year, Tootsie Roll's relatively steady success makes it a delicious proposition for potential buyers, said Mr. Pines. It has $67 million in cash and maintains a dividend yield of over 1%. "That'd be a beautiful thing to buy," said Mr. Pines.What?s Gone Wrong With H-P? by Ben Worthen, Wall Street Journal [New York, N.Y], 07 Nov 2012.In 2010, Hewlett-Packard Co.'s then-chief executive Mark Hurd boasted the company was "the largest IT company in the world" ?. Two years and two CEOs later, H-P is stumbling. Over that time, the ? company's market capitalization has fallen to less than $30 billion from more than $100 billion. ?Current CEO Meg Whitman has said H-P - which sells tech products including personal computers, printers, servers and consulting services - is now saddled with outdated products, poor internal processes and ?predicts ? that H-P won't achieve meaningful growth until at least 2015. ?Revolving Door at the Top. Four CEOs have run H-P since 2005. Each brought his or her own executives, often from outside ?. More than two dozen executives ranked senior vice president or higher have left in the last two years alone. ? last month, Ms. Whitman [said] "The churn has caused multiple inconsistent strategic choices" and "significant executional miscues."In 2005, ? then-CEO Carly Fiorina combined H-P's personal-computer business with its printer business. Ms. Fiorina was replaced later that year by Mr. Hurd, who split the two businesses up. After Mr. Hurd was ousted in 2010, his successor Leo Apotheker, announced a plan to spin off the PC business. That was reversed by Ms. Whitman after she became CEO in 2011.? CEOs have laid off -- or pledged to cut -- about 75,000 workers since 2005. Ms. Whitman herself has plans to lay off upwards of 29,000 employees, more than 8% of H-P's total 349,000-person workforce. ? H-P's employee morale has collapsed. A decade-plus of pay cuts and layoffs have left many ? employees distrustful of H-P's leadership, said Kimberly Elsbach, a professor at the business school at University of California, Davis?. "There's an anxiety that permeates the workforce that has a chronic impact on people," she said.H-P's fix-it strategy: Even as she cuts the workforce, Ms. Whitman has said that stable leadership will result in a consistent strategy and boost morale over time. She has pledged to remain CEO.Lack of Investments. Mr. Hurd steadily increased H-P's profits - ? partly by cutting spending on programs ? for future growth. [R & D] spending, ? fell from $3.5 billion a year before he took the helm to $3 billion the year he left. Among the areas where Mr. Hurd cut most aggressively was the services business, eliminating thousands of the employees brought over from a $13 billion purchase of outsourcing giant Electronic Data Systems Corp. in 2008. ?More recently, four of the unit's biggest customers didn't renew deals. Unlike H-P's PC or printer businesses where the company can order fewer parts when sales slump, the services business is made up of thousands of consultants. Getting costs in line with revenue means cutting jobs, but that can form a vicious cycle.? Ms. Whitman said H-P's past cuts to product development was hurting the company. She highlighted a fast-growing segment of the printer market where H-P hadn't updated its entry for seven years.H-P's fix-it strategy: ? spend some of the savings from Ms. Whitman's 29,000 layoffs on new [R & D]. Ms. Whitman also has said H-P will put in place new software for managing its sales and human-resources needs and for tracking its consultants that will make the company run more efficiently.Poor Use of Cash. ? H-P has acquired new technologies. But many ? have fizzled, leaving the company with less cash and more debt than its rivals and effectively shutting it out of future deals. In 2007, H-P had more than $11 billion in cash and $5 billion in debt. In four of the next six fiscal years, however, H-P spent close to twice the amount of its free cash flow on acquisitions?. At the end of its most recent quarter, H-P had just $9.5 billion in cash and more than $24 billion in long-term debt. H-P's cash is well below that of its rivals ? and it is among the few major tech companies to have more debt than cash. ?H-P's fix-it strategy: Ms. Whitman has said H-P must pay off debt and build up its cash balance ?.Declining Product Lines. ? Worldwide personal computer sales fell more than 8% in the most recent quarter?. H-P's share of the PC market fell to 15.9% in the third quarter from 17.4% a year earlier?. Printer sales slid 3% in the most recent quarter as people print less, server sales also fell 3% as business embrace online services that don't require hardware purchases. H-P's server business has also been hurt by a dispute with Oracle over software development for some high-end systems.? In fiscal 2011, H-P increased its headcount by 25,000 employees, even as sales began declining. Through the first nine months of 2012, sales fell almost $5 billion from a year earlier to $90.4 billion, but sales-related expenses climbed. While H-P has some compelling products, the company "is unable to communicate the value of H-P," ?.H-P's fix-it strategy: Ms. Whitman ? expects the company to grow in line with the economy. She plans to increase profitability in part by eliminating many ? products that are similar ? such as half of its 2,100 ? laser printers. ??Glaxo to Make Hostile Bid for Human Genome Sciences,? New York Times, May 9, 2012GlaxoSmithKline plans to take its $2.59 billion bid for Human Genome Sciences directly to shareholders this week, after being rejected by the biotechnology company last month.On Wednesday, GlaxoSmithKline, the large British drug maker, announced it would offer investors $13 a share, rebuffing an invitation by Human Genome Sciences to participate in the strategic review process. The bid is 81% above the company?s closing price on April 18, the day before Glaxo first announced the offer.Glaxo ?continues to believe it has made a full and fair offer which is in the interest of shareholders of both companies,? the company said in a statement on Wednesday.Pharmaceuticals have been fertile ground for deal-making, as companies look to restock their product pipelines. In April, AstraZeneca agreed to buy Ardea Biosciences for $1.26 billion.But health care companies have also been reticent to enter pacts where they deem the price too low. Last month, Illumina, a pioneer in the field of genetic analysis, thwarted a takeover play by Roche Holding, the Swiss pharmaceutical giant.Glaxo and Human Genome Sciences have a history. The two companies split the profits on Benlysta, a Lupus drug, and are working together to develop other drugs to treat heart disease and diabetes.After Glaxo announced its bid last month, Human Genome Sciences said the offer did not appropriately value the company. At the time, Human Genome Sciences said it was exploring strategic options, including a possible sale, and welcomed the participation of Glaxo.But Glaxo declined to participate in the process on Wednesday, saying it was ?unnecessary.? Instead, the company said it was ?important? for shareholders of Human Genome Sciences to understand that Glaxo was ?committed to proceeding with its offer.??There is a clear strategic and financial logic to this combination,? Glaxo said in the statement.?GSK buys HGS for $3.00 billion,? by Kevin Grogan, July 16, 2012,The rumours were right and GlaxoSmithKline has won the day to acquire Human Genome Sciences, raising its original offer by $1.25 to $14.25 per share.The transaction values HGS at $3.60 billion on an equity basis, or $3.00 billion net of cash and debt, and represents a premium of 99% to the HGS closing price of $7.17 per share on April 18. That was the last day of trading before HGS publicly disclosed GSK?s initial private offer of $13 per share, or $2.60 billion, which was repeatedly rejected by the US biotech's board.The deal means that GSK gets complete ownership of the lupus drug Benlysta (belimumab), plus the late-stage cardiovascular treatment darapladib and albiglutide, currently in Phase III for type 2 diabetes. The UK-based major says it expects to achieve at least $200 million in cost synergies to be fully realised by 2015, and the transaction should be accretive to core earnings beginning in 2013.GSK chief executive Sir Andrew Witty said: ?we are pleased to have reached a mutually beneficial agreement with HGS on friendly terms". He added that the combination "represents clear financial and strategic logic for both companies and our respective shareholders", claiming that "this is a natural next step in our nearly 20-year relationship with HGS".His counterpart at HGS, Thomas Watkins, said that "after a thorough analysis of strategic alternatives", a combination with GSK "is the best course of action for our company and the best way to maximise value for our stockholders". He added that "we look forward to working with GSK to ensure a seamless transition".Most observers believe that GSK has picked up HGS for a very reasonable price but no other offers were forthcoming. The former noted that it assessed the potential returns of this acquisition relative to its long-term share buyback programme and continues to expect to repurchase ?2-2.5 billion in shares in 2012.The Aluminum Can Wars Begin, by John W. Miller, Wall Street Journal, September 25, 2012PITTSBURGH?The pint-size aluminum beer can arrives at Pat Waters' table at Jack's Bar ?. It may make a return appearance two months later. After the 72-year-old Mr. Waters savors his Miller High Life, the can is dropped down a hole in the bar floor and taken to a scrapyard, where it is baled with 25,000 other cans.Pat Waters, 72, drinks two cans of Miller High Life each day at Jack's, a Pittsburgh bar. It is then shipped to an Alcoa Inc. plant, where it is melted and rolled into thin strips. The strips travel to a can factory, and the cans go to the MillerCoors brewery in Eden, N.C., which brews High Life?partly for the Pittsburgh market.? the world's largest aluminum makers ? are engaged in a tussle over ? the 92.5 billion ?beverage cans made in America every year.Alcoa and Atlanta-based Novelis ? had been jointly collecting and recycling cans since 2009, when they created a joint venture to centralize collection. Last year, it collected 40 billion cans. But the two aluminum makers have parted ways and are bent on trying to outcollect each other.Novelis withdrew from the venture Aug. 31?leaving it entirely to Alcoa?and is setting up a new organization with a goal of collecting 60 billion cans a year by 2015. By going alone, Novelis says it will now have the freedom to increase can purchases, and buy them from a wider variety of sources?.The company wants to get 80% of its aluminum from scrap sources by 2020, up from 35% today.Alcoa is a massive producer of primary aluminum. With only one smelter ? in South America, Novelis must rely on other companies for most of its raw aluminum. And it says it needs more flexibility in how it buys scrap.Used beverage cans usually trade at around 20% less?currently at about 81.5 cents a pound versus $1.04 a pound?than the value of primary aluminum. The costs of cleaning and processing make cans only marginally cheaper. Those prices have stayed consistent over the last five years.Novelis says it believes using more cans will allow it to increase sales in places where lower carbon footprints have a marketing value, and to set itself up to minimize carbon taxes if they are implemented. "It's a long view, but this helps protect our business from the impact of regulatory changes," says Derek Prichett, Novelis's vice president for global recycling.Making cans from recycled aluminum uses 95% less energy than manufacturing them from raw materials, such as bauxite, says the Aluminum Association, a Washington-based industry group.At Alcoa, officials say they're ready for the can battle. "When Novelis said they wanted to pull out, we were happy to oblige," says Kevin Lowery, a spokesman for the firm's global flat rolled products unit.Alcoa, which has been recycling aluminum since it was founded in 1888 when aluminum tea pots were melted down, says it is far ahead. It says it will be able to increase can collection rates with new technologies such as reverse vending machines that offer cash or credit for used cans, and more recycling bins to directly collect cans at places like large apartment buildings.Aluminum is one of the easiest metals to recycle. In 60 days, a can of beer can be sold, trashed, collected, melted, turned into sheet, cast into a new can, and filled again with fermented barley. Cans make up 2% of the volume of recycled trash, but 40% of the value, according to the industry.It takes about 25 cans to make a pound. By comparison, recovered paper is currently trading for between five and 20 cents a pound, and the plastic used in beverage containers for between 15 and 30 cents a pound, according to the Institute of Scrap Recycling Industries."Municipalities are realizing they can make money off cans, and increasingly, government authorities are auctioning off the cans they collect," said Lloyd O'Carroll, an analyst with Davenport & Co. of Richmond, Va.? the biggest aggregate source is still old-fashioned scrap yards, which collect and sell about 40% of all recycled aluminum cans. Randy Castriota, who runs the Pittsburgh yard that takes cans from Jack's Bar, collects about a million cans monthly. He applauds the bust-up of the joint venture."Competition between those guys will make the price go up," he said. Mr. Castriota says he sells 90% of his cans to the joint venture that Alcoa is now running on its own. "But I'm open to selling to whoever pays," says Mr. Castriota, who said he was recently contacted by Novelis. ?

 

Paper#56456 | Written in 18-Jul-2015

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