A $45,000 investment in a new conveyor system is projected to improve throughput and increasing revenue by $14,000 per year for five years. The conveyor will have an estimated market value of $4,000 at the end of five years.
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A $45,000 investment in a new conveyor system is projected to improve throughput and increasing revenue by $14,000 per year for five years. The conveyor will have an estimated market value of $4,000 at the end of five years. Using NPV with a MARR of 12%, is this a good investment?
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- Scenario 3 Ben Gibson, the purchasing manager at Coastal Products, was reviewing purchasing expenditures for packaging materials with Jeff Joyner. Ben was particularly disturbed about the amount spent on corrugated boxes purchased from Southeastern Corrugated. Ben said, I dont like the salesman from that company. He comes around here acting like he owns the place. He loves to tell us about his fancy car, house, and vacations. It seems to me he must be making too much money off of us! Jeff responded that he heard Southeastern Corrugated was going to ask for a price increase to cover the rising costs of raw material paper stock. Jeff further stated that Southeastern would probably ask for more than what was justified simply from rising paper stock costs. After the meeting, Ben decided he had heard enough. After all, he prided himself on being a results-oriented manager. There was no way he was going to allow that salesman to keep taking advantage of Coastal Products. Ben called Jeff and told him it was time to rebid the corrugated contract before Southeastern came in with a price increase request. Who did Jeff know that might be interested in the business? Jeff replied he had several companies in mind to include in the bidding process. These companies would surely come in at a lower price, partly because they used lower-grade boxes that would probably work well enough in Coastal Products process. Jeff also explained that these suppliers were not serious contenders for the business. Their purpose was to create competition with the bids. Ben told Jeff to make sure that Southeastern was well aware that these new suppliers were bidding on the contract. He also said to make sure the suppliers knew that price was going to be the determining factor in this quote, because he considered corrugated boxes to be a standard industry item. As the Marketing Manager for Southeastern Corrugated, what would you do upon receiving the request for quotation from Coastal Products?A 100- room hotel has an ADR of $120 per room, variable cost of $15 per room and monthly fixed cost of $200,000. The average occupancy rate is equal to 70%. Assume 30 days in a month and 360 days in a year. Find the break-even occupancy %.Consider the requirement that shopping malls need a license to remain open 24 hours, where these licenses are in fixed supply. These licenses are however freely tradable among actual and potential owners, and the industry is perfectly competitive. If the average 24-hour shopping mall’s annual revenue is $250,000, while the licenses may be leased at an annual fee of $100,000. Given this information, average variable cost for the industry would be $100,000. Is the preceding statement true or false?
- Gas Me Up is considering offering bagged ice sales through a self-service company that would locate a machine on the edge of the parking lot. IceBox would charge a monthly lease fee of $325 for setup and maintenance and there is a utilities’ cost Gas Me Up incurs of $0.07 for every bag of ice. KeepItCool would charge a monthly lease of only $225, but the added energy cost for every bag of ice is $0.11 due to the larger size of the machine. Customers purchase each bag of ice for $2.50, regardless of the company, but Gas Me Up only earns 40% of the total revenue for each bag of ice sold. What is the annual break-even point for each option? At what volume in number of bags of ice would the two options have the same cost? At what forecasted volume should Gas Me Up select IceBox and what volume should the company select KeepItCool and why?A Limited is a manufacturer of china plates. Its costs include the following: Payments to plate painters. The painters each receive a basic wage and then are paid a fixed sum for each completed plate that passes the firm’s quality checks. Managing director’s salary Cost of china clay used in production Royalty payable to designer. The designer receives £30 for production runs of up 1000, £60 for production runs of up to 2000, and so on Depreciation of delivery vehicle” “Required: Classify each of these costs as: variable, fixed, stepped or semi-variable"Edwards Machine Tools needs to purchase a new machine. The basic model is slower but costs less, while the advanced model is faster but costs more. Profitability will depend on future demand. The following table presents an estimate of profits over the next three years. Decision Low Medium High Basic Model $65,000 $85,000 $125,000 Advanced Model $70,000 $140,000 $240,000 Given the uncertainty associated with the demand volume and no other information to work with, how would you make a decision? Use the Excel template Decision Analysis and explain your reasoning.
- As an operations management consultant, you have been asked to evaluate a furniture manufacturer’s cash-to-cash conversion cycle under the following assumptions: sales of $23.5 million, cost of goods sold of $20.8 million, 50 operating weeks a year, total average on-hand inventory of $2,150,000, accounts receivable equal to $2,455,000, and accounts payable of $3,695,000. What do you conclude? What would be the impact of reducing the accounts payable from $3,695,000to $2,000,000 and all other data remained the same?Jordan Airline routinely overbooks its flights from Dallas to Florida. Overbooking discounted seats can be expensive because providing a bumped passenger with a last-minute flight on a competing carrier can cost $2,200. A 150-passenger jet costs about $150,000 to operate from Raleigh to Atlanta. The average ticket price is $2,000. Table. The frequency of no-shows NO-SHOWS FREQUENCY 1 15 2 10 3 10 4 5 5 5 6 5 a. how many seats should be overbooked? (show your calculations) b. Korean Airline increased the average ticket price from $2,000 to $3,000 on its Atlanta/Seoul route for the holidays. How would the increased ticket price affect the number of seats overbooked? (show your calculations)[EXCEL] Computing terminal-year FCF: Healthy Potions, Inc., a pharmaceutical company, bought a machine at a cost of $2 million five years ago that produces pain-reliever medicine. The machine has been depreciated over the past five years, and the current book value is $800,000. The company decides to sell the machine now at its market price of $1 million. The marginal tax rate is 30 percent. What are the relevant cash flows? How do they change if the market price of the machine is $600,000 instead?
- Alma has decided to purchase a cell phone with Internetaccess and must choose a rate plan. The “occasional-user”plan is $0.50/minute, regardless of how many minutes ofair time are used. The “frequent-user” plan charges a flatrate of $55/month for 70 minutes of air time plus $0.33/minute for any time over 70 minutes. The “execu-tive” plan charges a flat fee of $75 per month for 100 minutes of air time plus $0.25/minute over 100 minutes. Inthe interest of simplicity, Alma has decided to go with theoccasional-user plan to start with and then upgrade as shesees fit at a later date.a. How much air time per month would Alma need touse before she upgrades from the occasional-user planto the frequent-user plan?b. At what usage rate should she switch from thefrequent-user plan to the executive plan?Alma has decided to purchase a cell phone with Internetaccess and must choose a rate plan. The “occasional-user”plan is $0.50/minute, regardless of how many minutes ofair time are used. The “frequent-user” plan charges a flatrate of $55/month for 70 minutes of air time plus$0.33/minute for any time over 70 minutes. The “executive” plan charges a flat fee of $75 per month for 100minutes of air time plus $0.25/minute over 100 minutes. Inthe interest of simplicity, Alma has decided to go with theoccasional-user plan to start with and then upgrade as shesees fit at a later date.a. How much air time per month would Alma need touse before she upgrades from the occasional-user planto the frequent-user plan?b. At what usage rate should she switch from thefrequent-user plan to the executive plan?A mobile phone producer has fixed costs of 1,5 m $ and variable costs of 800 $. It sells its phones for 1.100 $. A bakery produces bread rolls with variable costs of 1 $ and sells them for 1.5$. Its fixed costs are 30.000 $. Calculate the break-even volumes for both firms.