8. Syringe pumps often fail because reagents adhere to the ceramic piston and deteriorate the seal. Rapir Chemical developed an integrated polymer dynamic seal that provides a higher sealing force on the sealing lip, resulting in extended seal life. One of Rapir's customers expects to reduce downtime by 30% as a result of the new seal design. If lost production would have cost the company Php6M per year for the next 4 years, how much could the company afford to spend now on the new seals, if it uses an interest rate of 12% per year? A Php18.22M B Php28.68M C Php5.47M D Php8.60M
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- Hydrochloric acid, which fumes at room temperatures, creates a very corrosive work environment. A mixing machine, working in this environment, is deteriorating fast and can be used for only one more year, at which time it will be scrapped. It was purchased 3 years ago for $88,000 and its operating cost for the next year is expected to be $63,000. A more corrosion-resistant challenger will cost $226,000 with an operating cost of $48,000 per year. It is expected to have a $60,000 salvage value after its 10-year ESL. At an interest rate of 15% per year, what minimum trade-in value will make the challenger economically attractive?Jonathan Butler, process engineer, knows that the acceptance of a new process design will depend on its economic feasibility. The new process is designed to improve environmental performance. On the negative side, the process design requires new equipment and an infusion of working capital. The equipment will cost $1,200,000, and its cash operating expenses will total $270,000 per year. The equipment will last for 7 years but will need a major overhaul costing $120,000 at the end of the fifth year. At the end of 7 years, the equipment will be sold for $96,000. An increase in working capital totaling $120,000 will also be needed at the beginning. This will be recovered at the end of the 7 years. On the positive side, Jonathan estimates that the new process will save $400,000 per year in environmental costs (fines and cleanup costs avoided). The cost of capital is 12%. PRESENT VALUE YEAR 7 = ???Barron Chemical uses a thermoplastic polymer to enhance the appearance of certain RV panels. The initial cost of one process was $126,000 with annual costs of $48,000. Revenues are $78,000 in year 1, increasing by $1000 per year. A salvage value of $23,000 was realized when the process was discontinued after 8 years. What rate of return did the company make on the process? The rate of return made by the company is
- A small company that manufactures vibration isolation platforms is trying to decide whether it should immediately upgrade the current assemblysystem D, which is rather labor-intensive, with the more highly automated system C one year from now. Some components of the current system canbe sold now for $9000, but they will be worthless hereafter. The operating cost of the existing system is $192,000 per year. System C will cost $320,000 with a $50,000 salvage value after four years. Its operating cost will be $68,000 per year. If you are told to do a replacement analysis using an interest rate of 10% per year, which system do you recommend?In evaluating projects, LeadTech’s engineers use a rate of 15%. One year ago a robotic transfer machine was installed at a cost of $38,000. At the time, a 10-year life was estimated, but the machine has had a downtime rate of 28%, which is unacceptably high. A $12,000 upgrade should fix the problem, or a labor-intensive process costing $3500 in direct labor per year can be substituted. The plant estimates indirect plant expenses at 60% of direct labor, and it allocates front office overhead at 40% of plant expenses (direct and indirect). The robot has a value in other uses of $15,000. What is the difference between the EUACs for upgrading and switching to the labor-intensive process?Barron Chemical used a thermoplastic polymer to enhance the appearance of certain RV panels. The initial cost of one process was $130,000 with annualcosts of $49,000. Revenues were $78,000 in year 1, increasing by $1000 per year. A salvage value of $23,000 was realized when the process was discontinued after 8 years. What rate of return did the company make on the process?
- A small company that manufactures vibration isolation platforms is trying to decide whether it should replace the current assembly system (D), which is rather labor intensive, now or 1 year from now with a system that is more automated (C). Some components of the current system can be sold immediately for $9000, but they will be worthless hereafter. The operating cost of the existing system is $192,000 per year. System C will cost $320,000 with a $50,000 salvage value after 4 years. Its operating cost will be $68,000 per year. If you are told to do a replacement analysis using an interest rate of 10% per year, which system do you recommend?3. Useful lives are equal to the study period At the Motorola plant in Mesa, Arizona, it is desired to determine whether oneinch-thick insulation or two-inch-thick insulation should be used to reduce heat loss from a long section of steam pipe. The heat loss from this pipe without any insulation would cost $2.00 per linear foot per year. The one-inch insulation will eliminate 88% of the heat loss and will cost $0.60 per foot. Two-inch insulation will eliminate 92% of the heat loss and will cost $1.10 per foot. The steam pipe is 1,000 feet in length and will last for10 years. MARR = 6% per year. Which insulation thickness should be recommended?Garrett Boone, Ayayai Enterprises’ vice president of operations, needs to replace an automatic lathe on the production line. The model he is considering has a sales price of $395,900 and will last for 12 years. It will have no salvage value at the end of its useful life. Garrett estimates the new lathe will reduce raw materials scrap by $42,500 per year. He also believes the lathe will reduce energy costs by $23,500 per year. If he purchases the new lathe, he will be able to sell the old lathe for $5,338.Click here to view the factor table.(a) Calculate the lathe’s internal rate of return. Internal rate of return $ % (b) If Ayayai Enterprises uses a 10% hurdle rate, should Garrett purchase the lathe? YesNo
- Your company has been approached to bid on a contract to sell 21,000 voice recognition (VR) computer keyboards per year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible. The equipment necessary for the production will cost $3,500,000 and will be depreciated on a straight-line basis to a zero salvage value. Production will require an investment in net working capital of $115,000 to be returned at the end of the project, and the equipment can be sold for $235,000 at the end of production. Fixed costs are $770,000 per year and variable costs are $38 per unit. In addition to the contract, you feel your company can sell 4,100, 11,700, 13,700, and 7,000 additional units to companies in other countries over the next four years, respectively, at a price of $135. This price is fixed. The tax rate is 23 percent, and the required return is 13 percent. Additionally, the president of the company will undertake the project only…Your company has been approached to bid on a contract to sell 21,000 voice recognition (VR) computer keyboards per year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible. The equipment necessary for the production will cost $4,200,000 and will be depreciated on a straight-line basis to a zero salvage value. Production will require an investment in net working capital of $150,000 to be returned at the end of the project, and the equipment can be sold for $270,000 at the end of production. Fixed costs are $805,000 per year and variable costs are $45 per unit. In addition to the contract, you feel your company can sell 4,800, 12,400, 14,400, and 7,700 additional units to companies in other countries over the next four years, respectively, at a price of $130. This price is fixed. The tax rate is 25 percent, and the required return is 11 percent. Additionally, the president of the company will undertake the project only…In a cold storage plant, it is desired to determine whether to use insulation two inches thick or three inches in insulating the walls of the cold storage warehouse. Heat absorbed through the walls without insulation would cost P96.00 per year per square meter. Two-inch insulation will cost P30.40 per square meter and will cut out 89% of the loss. Three-inch insulation will cut out92% of the loss and will cost P65.00 per square meter. Using life of 15 years for the insulation with no salvage value and a minimum attractive return of 8%, what thickness of insulation should be used?