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A company is considering expanding a production line, which is expected to remain operational for the foreseeable future. There are two machines, A and B, which could do the job. However, the two machinces are not the same. First of all the price of A is 400 MUSD and the price of B is 300 MUSD. Furthermore, A needs to be replaced every 8, whereas B needs to be replaced every 4. Otherwise, the machines perform similarly, producing 20 MUD additional cashflow every year. The firm's cost of capital is 22.0%, 1. What is the cost equivalent of A? MUSD/year 2. What is the npv of the project if A is selected? MUSD

A company is considering expanding a production line, which is expected to remain operational for the foreseeable future. There are two machines, A and B, which could do the job. However, the two machinces are not the same. First of all the price of A is 400 MUSD and the price of B is 300 MUSD. Furthermore, A needs to be replaced every 8, whereas B needs to be replaced every 4. Otherwise, the machines perform similarly, producing 20 MUD additional cashflow every year. The firm's cost of capital is 22.0%, 1. What is the cost equivalent of A? MUSD/year 2. What is the npv of the project if A is selected? MUSD

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter17: Activity Resource Usage Model And Tactical Decision Making
Section: Chapter Questions
Problem 18E: A company is considering a special order for 1,000 units to be priced at 8.90 (the normal price...
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A company is considering expanding a production line, which is expected to remain operational for the foreseeable future. There are two machines, A and B, which could do the job. However, the two machinces are not the same. First of all the price of A is 400 MUSD and the price of B is 300 MUSD. Furthermore, A needs to be replaced every 8, whereas B needs to be replaced every 4. Otherwise, the machines perform similarly, producing 20 MUD additional cashflow every year. The firm's cost of capital is 22.0%, 1. What is the cost equivalent of A? MUSD/year 2. What is the npv of the project if A is selected? MUSD
A company is considering expanding a production line, which is expected to remain operational for the foreseeable future. There are two machines, A and B, which could do the job. However, the two machinces are not the same. First of all the price of A is 400 MUSD and the price of B is 300 MUSD. Furthermore, A needs to be replaced every 8, whereas B needs to be replaced every 4. Otherwise, the machines perform similarly, producing 20 MUSD additional cashflow every year. The firm's cost of capital is 22.0%. 1. What is the cost equivalent of A? + MUSD/year 2. What is the npv of the project if A is selected? MUSD Answer format: 123.12; For a percent value of 12.34% enter 12.34 (without the percent sign); Negative values should be entered with the minus sign. When given a choice, pick the result that is correct up to rounding error. "None of the Above" is just as likely to be the correct answer as the others.
Transcribed Image Text:A company is considering expanding a production line, which is expected to remain operational for the foreseeable future. There are two machines, A and B, which could do the job. However, the two machinces are not the same. First of all the price of A is 400 MUSD and the price of B is 300 MUSD. Furthermore, A needs to be replaced every 8, whereas B needs to be replaced every 4. Otherwise, the machines perform similarly, producing 20 MUSD additional cashflow every year. The firm's cost of capital is 22.0%. 1. What is the cost equivalent of A? + MUSD/year 2. What is the npv of the project if A is selected? MUSD Answer format: 123.12; For a percent value of 12.34% enter 12.34 (without the percent sign); Negative values should be entered with the minus sign. When given a choice, pick the result that is correct up to rounding error. "None of the Above" is just as likely to be the correct answer as the others.
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