A consulting engineer is considering two methods for lining landfill for municipal solid waste management in Bannock County, Idaho. A geosynthetic bentonite clay liner (GCL) will cost $2.0 million to install, and if it is renovated after 4 years at a cost of $400,000, its life can be extended another 2 years. Alternatively, a high-density polyethylene (HDPE) geomembrane can be installed that will have a useful life of 12 years. At an interest rate of 6% per year, how much money can be spent on the HDPE liner for the two methods to break even?
Q: In connection with surfacing a new highway, a contractor has a choice of two sites on which to set…
A: The details are given regarding fixed cost and Variable cost for surfacing a new highway. There are…
Q: AMT, Inc., is considering the purchase of a digital camera for the maintenance of design…
A: Internal rate of return: It is the tools utilised in capital budgeting to estimate the…
Q: A large city in the midwest needs to acquire a street-cleaning machine to keep its roads looking…
A: There are two alternatives available- one is the used system and other is the new system. Present…
Q: AMT, Inc., is considering the purchase of a digital camera for the maintenance of design…
A: Annual worth is calculated over one life cycle of the asset and is usually used to compare the…
Q: A grocery distribution center is considering whether to invest in RFID or bar code technology to…
A: Incremental IRR is the rate of return which is calculated to find a better alternative in the case…
Q: Quantum Logistics, Inc., a wholesale distributor, is considering the construction of a new warehouse…
A: Calculating the future worth of each site: Future value of annuity=C×[(1+r)n-1]r C = Net Annual…
Q: whether this is a desirable investment by using the present worth method.
A: Present worth method means the difference between PV of cash inflow & Cash outflow. Decision…
Q: AMT, Inc., is considering the purchase of a digital camera for the maintenance of design…
A: IRR method is one of the project selection methods in capital budgeting. IRR is compared with the…
Q: he capital investment requirement is P345,000 and the estimated market value of the system after a…
A: Net Cashflow for each of 6 years = Annual revenues - Annual expenses Net Cashflow for each of 6…
Q: The chief ranger of the state's Department of Natural Resources is considering a new plan for…
A: Net Present Value (NPV) :— It is the sum of present value of all cash flows. Difference in NPV…
Q: The owner of a downtown parking lot has employed a civil engineering consulting firm to advise him…
A: Present value of annuity Annuity is a series of equal amount payment at equal interval for a…
Q: Central Laundry and Cleaners is considering replacing an existing piece of machinery with a more…
A: The question is based on the concept of replacement decision, the old machine can be replaced to get…
Q: AMT, Inc., is considering the purchase of a digital camera for the maintenance of design…
A: The return of initial investment during the life of the investment is known as capital recovery. An…
Q: The international environmental management standard ISO 14000 requires that Oliver, the pollution…
A: Cashflow table helps to evaluate the cash inflow and outflow of the projects. Project which have…
Q: A highway department is considering building a temporary bridge to cut travel time during the three…
A:
Q: The landfill for Wellsburg has an area of 30 acres available for receiving waste from the city of…
A: At break-even, the total revenues are equal to the total costs. Also, Break even units = Fixed costs…
Q: The plant engineer of a major food processing corporation is evaluating alternatives to supply…
A:
Q: The Tennessee Department of Highways is trying to decide whether it should “hot-patch” a short…
A: Hot patch method: Cost = 500(800)(A/P, 9%, 10) + 24,000(A/P, 9%,10) + 3,000(A/F, 9%, 2)(P/A, 9%,…
Q: The world’s largest carpet maker has just completed a feasibility study of what to do with the…
A: Net present value of cash flows is the excess of present value of cash inflows over present value of…
Q: Citco Company is considering investing up to $500,000 in a sustainability-enhancing project. Its…
A: Presents value shows the value of the project in the current market.
Q: AMT, Inc., is considering the purchase of a digital camera for the maintenance of design…
A: External rate of return is the rate of return on a project where all the extra returns on the…
Q: where computer-aided design files can be superimposed over the digital pictures. Differences between…
A: The payback period method is used to appraise various capital investment projects. It uses the cash…
Q: Leslie Blandings, division manager of Audiotech Inc., was debating the merits of a new product—a…
A: The acronym ROI stands for return on investment. It is defined as the return obtained from the…
Q: discounted payback method.
A: The payback period method is used to appraise various capital investment projects. It uses the cash…
Q: A remotely located air sampling station can be powered by solar cells or by running an electric line…
A: Capital budgeting refers to the evaluation of the profitability of potential investment and projects…
Q: A construction firm is considering establishing an engineering computing center. The center will be…
A: Given annual operating and maintenance cost for each workstation is $25,000 MARR = 15% Service life…
Q: A process control manager is considering two robots to improve materials-handling capacity in the…
A: Robot X : First Cost = $ 74000 Annual M&O Cost = $ 31,000 Salvage Value = $ 35,000 Revenue…
Q: A software package created by Navarro & Associates can be used for analyzing and designing…
A: Present worth method is the method, under this the cash flow of every alternative would be decreased…
Q: A process control manager is considering two robots to improve materials-handling capacity in the…
A: Given data: A process control manager is considering two robots to improve materials-handling…
Q: Lipper & Garden is looking at a new flower processing system with an installed cost of $304,000.…
A: Net present value is the method through which the profitability of a project is calculated. Under…
Q: An engineer is considering two different liners for an evaporation pond that will receive salty…
A: Requirement a:
Q: A remotely located air sampling station can be powered by solar cells or by running an above ground…
A: Solar cells Power line Initial Costs 17400 26000 Annual costs 2100 1000 Time Period 5 5…
Q: A large city in the midwest needs to acquire a street-cleanıng machine to keep its roads looking…
A: Breakeven point (BEP) is the term that is used in the different business areas of the finance as…
Q: A remotely located air sampling station can be powered by solar cells or by running an above ground…
A: To compare the alternatives, equivalent annual cost need to be calculated. Alternative with more…
Q: A construction company is evaluating the purchase of a new concrete mixer with hydraulic hopper and…
A: In the given question we are provided with the information of a construction company that is…
Q: Computer-Aided Machining Company plans to invest in a state- of-the-art 5-axis machining center with…
A: Computer Aided Machining Company's Invoice price of machining center = $450000 Freight = $25000 Site…
Q: A large city in the mid-West needs to acquire a street-cleaning machine to keep its roads looking…
A: There are two alternatives available First the used system and another is the new system Present…
Q: A process control manager is considering two robots to improve materials handling capacity in the…
A: Calculation of Robot to be selected on the basis of ROR is shown below: Formula sheet for the above…
Q: AMT, Inc., is considering the purchase of a digital camera for maintenance of design specifications…
A: NPV computes the existing value of future benefits by discounting future worth with a stated…
Q: Quantum Logistics, Inc., a wholesale distributor, is considering the construction of a new warehouse…
A: Present Worth (PW) is value of an investment proposal at current point of time. PW is computed by…
Q: North City must choose between two new snow-removal machines. The SuperBlower has a $70,000 first…
A: Operating costs are those costs which are used to operate a machine. These costs are an important…
Q: A large city in the mid-West needs to acquire a street-cleaning machine to keep its roads looking…
A: There are two alternatives available First the used system and other is the new system Present…
Q: The city council wants the municipal engineer to evaluate three alternatives for supplementing the…
A: Present worth analysis is an analysis in which we convert all the cash flows to present worth using…
Q: AMT, Inc., is considering the purchase of a digital camera for the maintenance of design…
A: IRR is the rate of return a project generates through its lifetime expressed in annual terms. It is…
Q: An engineer is working on the layout of a new research and experimentation facility. Two plant…
A: MARR: The minimum acceptable rate of return, regularly contracted MARR, or obstacle rate is the base…
Q: A software package created by Navarro & Associates can be used for analyzing and designing…
A: Present worth is the current value of a future sum of money or stream of cashflows given a…
Step by step
Solved in 2 steps with 2 images
- Mallette Manufacturing, Inc., produces washing machines, dryers, and dishwashers. Because of increasing competition, Mallette is considering investing in an automated manufacturing system. Since competition is most keen for dishwashers, the production process for this line has been selected for initial evaluation. The automated system for the dishwasher line would replace an existing system (purchased one year ago for 6 million). Although the existing system will be fully depreciated in nine years, it is expected to last another 10 years. The automated system would also have a useful life of 10 years. The existing system is capable of producing 100,000 dishwashers per year. Sales and production data using the existing system are provided by the Accounting Department: All cash expenses with the exception of depreciation, which is 6 per unit. The existing equipment is being depreciated using straight-line with no salvage value considered. The automated system will cost 34 million to purchase, plus an estimated 20 million in software and implementation. (Assume that all investment outlays occur at the beginning of the first year.) If the automated equipment is purchased, the old equipment can be sold for 3 million. The automated system will require fewer parts for production and will produce with less waste. Because of this, the direct material cost per unit will be reduced by 25 percent. Automation will also require fewer support activities, and as a consequence, volume-related overhead will be reduced by 4 per unit and direct fixed overhead (other than depreciation) by 17 per unit. Direct labor is reduced by 60 percent. Assume, for simplicity, that the new investment will be depreciated on a pure straight-line basis for tax purposes with no salvage value. Ignore the half-life convention. The firms cost of capital is 12 percent, but management chooses to use 20 percent as the required rate of return for evaluation of investments. The combined federal and state tax rate is 40 percent. Required: 1. Compute the net present value for the old system and the automated system. Which system would the company choose? 2. Repeat the net present value analysis of Requirement 1, using 12 percent as the discount rate. 3. Upon seeing the projected sales for the old system, the marketing manager commented: Sales of 100,000 units per year cannot be maintained in the current competitive environment for more than one year unless we buy the automated system. The automated system will allow us to compete on the basis of quality and lead time. If we keep the old system, our sales will drop by 10,000 units per year. Repeat the net present value analysis, using this new information and a 12 percent discount rate. 4. An industrial engineer for Mallette noticed that salvage value for the automated equipment had not been included in the analysis. He estimated that the equipment could be sold for 4 million at the end of 10 years. He also estimated that the equipment of the old system would have no salvage value at the end of 10 years. Repeat the net present value analysis using this information, the information in Requirement 3, and a 12 percent discount rate. 5. Given the outcomes of the previous four requirements, comment on the importance of providing accurate inputs for assessing investments in automated manufacturing systems.The Aubey Coffee Company is evaluating the within-plant distribution system for its new roasting, grinding, and packing plant. The two alternatives are (1) a conveyor system with a high initial cost but low annual operating costs and (2) several forklift trucks, which cost less but have considerably higher operating costs. The decision to construct the plant has already been made, and the choice here will have no effect on the overall revenues of the project. The cost of capital for the plant is 8%, and the projects’ expected net costs are listed in the following table: What is the IRR of each alternative? What is the present value of the costs of each alternative? Which method should be chosen?Newmarge Products Inc. is evaluating a new design for one of its manufacturing processes. The new design will eliminate the production of a toxic solid residue. The initial cost of the system is estimated at 860,000 and includes computerized equipment, software, and installation. There is no expected salvage value. The new system has a useful life of 8 years and is projected to produce cash operating savings of 225,000 per year over the old system (reducing labor costs and costs of processing and disposing of toxic waste). The cost of capital is 16%. Required: 1. Compute the NPV of the new system. 2. One year after implementation, the internal audit staff noted the following about the new system: (1) the cost of acquiring the system was 60,000 more than expected due to higher installation costs, and (2) the annual cost savings were 20,000 less than expected because more labor cost was needed than anticipated. Using the changes in expected costs and benefits, compute the NPV as if this information had been available one year ago. Did the company make the right decision? 3. CONCEPTUAL CONNECTION Upon reporting the results mentioned in the postaudit, the marketing manager responded in a memo to the internal audit department indicating that cash inflows also had increased by a net of 60,000 per year because of increased purchases by environmentally sensitive customers. Describe the effect that this has on the analysis in Requirement 2. 4. CONCEPTUAL CONNECTION Why is a postaudit beneficial to a firm?
- Austins cell phone manufacturer wants to upgrade their product mix to encompass an exciting new feature on their cell phone. This would require a new high-tech machine. You are excited about his new project and are recommending the purchase to your board of directors. Here is the information you have compiled in order to complete this recommendation: According to the information, the project will last 10 years and require an initial investment of $800,000, depreciated with straight-line over the life of the project until the final value is zero. The firms tax rate is 30% and the required rate of return is 12%. You believe that the variable cost and sales volume may be as much as 10% higher or lower than the initial estimate. Your boss understands the risks but asks you to explain the alternatives in a brief memo to the board, Write a memo to the Board of Directors objectively weighing out the pros and cons of this project and make your recommendation(s).Basuras Waste Disposal Company has a long-term contract with several large cities to collect garbage and trash from residential customers. To facilitate the collection, Basuras places a large plastic container with each household. Because of wear and tear, growth, and other factors, Basuras places about 200,000 new containers each year (about 20% of the total households). Several years ago, Basuras decided to manufacture its own containers as a cost-saving measure. A strategically located plant involved in this type of manufacturing was acquired. To help ensure cost efficiency, a standard cost system was installed in the plant. The following standards have been established for the products variable inputs: During the first week in January, Basuras had the following actual results: The purchasing agent located a new source of slightly higher-quality plastic, and this material was used during the first week in January. Also, a new manufacturing process was implemented on a trial basis. The new process required a slightly higher level of skilled labor. The higher- quality material has no effect on labor utilization. However, the new manufacturing process was expected to reduce materials usage by 0.25 pound per container. Required: 1. CONCEPTUAL CONNECTION Compute the materials price and usage variances. Assume that the 0.25 pound per container reduction of materials occurred as expected and that the remaining effects are all attributable to the higher-quality material. Would you recommend that the purchasing agent continue to buy this quality, or should the usual quality be purchased? Assume that the quality of the end product is not affected significantly. 2. CONCEPTUAL CONNECTION Compute the labor rate and efficiency variances. Assuming that the labor variances are attributable to the new manufacturing process, should it be continued or discontinued? In answering, consider the new processs materials reduction effect as well. Explain. 3. CONCEPTUAL CONNECTION Refer to Requirement 2. Suppose that the industrial engineer argued that the new process should not be evaluated after only one week. His reasoning was that it would take at least a week for the workers to become efficient with the new approach. Suppose that the production is the same the second week and that the actual labor hours were 9,000 and the labor cost was 99,000. Should the new process be adopted? Assume the variances are attributable to the new process. Assuming production of 6,000 units per week, what would be the projected annual savings? (Include the materials reduction effect.)Friedman Company is considering installing a new IT system. The cost of the new system is estimated to be 2,250,000, but it would produce after-tax savings of 450,000 per year in labor costs. The estimated life of the new system is 10 years, with no salvage value expected. Intrigued by the possibility of saving 450,000 per year and having a more reliable information system, the president of Friedman has asked for an analysis of the projects economic viability. All capital projects are required to earn at least the firms cost of capital, which is 12 percent. Required: 1. Calculate the projects internal rate of return. Should the company acquire the new IT system? 2. Suppose that savings are less than claimed. Calculate the minimum annual cash savings that must be realized for the project to earn a rate equal to the firms cost of capital. Comment on the safety margin that exists, if any. 3. Suppose that the life of the IT system is overestimated by two years. Repeat Requirements 1 and 2 under this assumption. Comment on the usefulness of this information.
- Alfred Home Construction is considering the purchase of five dumpsters and the transport truck to store and transfer construction debris from building sites. The entire rig is estimated to have an initial cost of $142,500, a life of 8 years, a $8500 salvage value, an operating cost of $40 per day, and an annual maintenance cost of $8000. Alternatively, Alfred can obtain the same services from the city as needed at each construction site for an initial delivery cost of $125 per dumpster per site and a daily charge of $34 per day per dumpster. An estimated 19 construction sites will need debris storage throughout the average year. If the minimum attractive rate of return is 11% per year, how many days per year must the equipment be required to justify its purchase? The number of days per year the equipment must be required is determined to beIn a bio-based material recycling company, the operation managers are considering a twin-screw extruder with a price of 12,000 OMR and another 2,000 OMR will be spent for shipping and installation of the extruder. The estimated net income generated from this machine is 3,500 OMR per year. The extruder will be used for 5 years, and then it will be sold for an estimated market value of 2,500 OMR. The extruder MARCS property class is 5 years. If the effective income tax rate (t) is 40% and the after-tax MARR is 10%. (a) What is the after-tax IRR for this project? (use trial and error procedure and GDS) (b) Should this extruder be purchased by the company?The Department of Public Works is trying to decide between "patching" a road or repaving it completely. If the "patching" system is used, approximately 300 cubic meters of material will be required, at $25 per cubic meter (on site). Additionally, the berms will need to be re-constructed, which will cost $3000. The annual cost of routine maintenance of the "patched" road would be $4000. Repairs would only last 2 years, after which they would have to be re-made. The other alternative is for the department to repave the entire road, which would cost $65,000. This area would last 10 years if the road were maintained at a cost of $15000 per year, starting in 4 years. Regardless of which alternative is chosen, the road will be rebuilt within 10 years. If the interest rate is 13% per year, which alternative should the department select, based on present value?
- Coyote Co. is building a waste landfill in the desert between Arizona and California. Coyote estimates that this landfill will be in operation for five years, will cost $250 million to build, and will generate $800 million in revenues during its useful life. Federal law requires that Coyote decommission and decontaminate the site at the end of its useful life. A team of engineers has studied the decontamination procedure and has estimated that Coyote will have to spend $15 million on the decommissioning process when the landfill is shut down in five years. Coyote’s credit-adjusted rate of interest is 10%. Use tables (PV of 1, PVAD of 1, and PVOA of 1) (Use the appropriate factor(s) from the tables provided.) Required: 1-a. Prepare the entry required for the recognition of any ARO asset and liability. 1-b. Prepare an amortization table.An engineer is considering two different liners for an evaporation pond that will receive salty concentrate from a brackish water desalting plant. A plastic liner will cost $0.90 per square foot and will have to be replaced in 20 years when precipitated solids have to be removed from the pond using heavy equipment. A rubberized elastomeric liner is tougher and, therefore, is expected to last 30 years, but it will cost $2.20 per square foot. The pond covers 110 acres (1 acre = 43,560 square feet). Which liner is more cost effective on the basis of an annual worth analysis at an interest rate of 8% per year? Solve using (a) tabulated factors, and (b) a calculator.The Camino Real Landfill was required to install a plastic liner to prevent leachate from migrating into the groundwater. The fill area was 50,000 m2 and the installed liner cost was $8 per m2. In order to recover the investment, the owner charges to unload at the rates of $10 per pick-up, $25 per dumptruck, and $70 per compactor-truck load. The fill area is adequate for 4 years. If the annual traffic is estimated to be 2500 pick-up loads, 650 dumptruck loads, and 1200 compactor-truck loads, what rate of return will the landfill owner make on the investment?