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- The owner of a greenhouse and nursery is considering whether to spend $6,000 to acquire the licensing rights to grow a new variety of rosebush, which she could then sell for $6 each. Per-unit variable cost would be $3. How many rosebushes would she have to produce and sell in order to break even?Doctor J. is considering purchasing a new blood analysis machine to test for HIV; it will cost $60,000. He estimates that he could charge $25.00 for an office visit to have a patient's blood analyzed, while the actual cost of a blood analysis would be $5.00. What would be his profit if he were to perform 5,000 HIV blood analyses?1. Kirsten is trying to decide where to go for her well-earned vacation. She would like to camp, but if the weather is bad, she will have to go to a motel. Given the costs and probabilities of bad weather given below, which destination should she choose? Camping cost Motel cost Probability of bad weather Nevada $21.2 $80.9 0.2 Oregon $15.9 $84.6 0.4 California $30 $95 0.1 a. California, because its EMV = $33.14 b. Nevada, because its EMV = $33.14 c. California, because its EMV = $36.5 d. Any of the 3 choices. e. Oregon, because its EMV = $43.38 f. Nevada, because its EMV = $43.38 g. None of the 3 choices. h. Oregon, because its EMV is $36.50.
- The original cost for a distillation tower is $24,000 and the useful life of the tower is estimated to be 8 years. The sinking-fund method for determining the rate of depreciation is used and the annual interest rate for the depreciation fund is 6 percent. If the scrap value of the distillation tower is $4000, determine book value of equipment at the end of 5 years. Notice: If you can't find exponent (x), you can use the value 0.6A businessman must decide whether to open a new mini grocery branch or simply extend the number of hours of its operation on its existing branch with a payoff of Php150,000. According to his friend, demand at a new location can either be low or high, which he probabilities are estimated to be 35% and 65%, respectively. If a new branch is opened and demand proves to be high, the businessman may choose to operate 24hrs (payoff is Php350, 000) or to operate 12hrs (payoff is Php200,000). If a new branch is opened and demand proves to be low, there is no need to operate on a 24-hr basis but instead, they will just stick to 12-hr operation with payoff of Php100,000 or enhance marketing strategy through advertising. Projected response to advertising may either be favorable or not favorable, with estimated probabilities of 40% and 60%, respectively. If demand is favorable, the payoff grows to Php310,000 and if the response in unfavorable, the payoff is Php120,000. The cost of advertising…The Hard to Beat Bakery is deciding whether to buy or repair an existing oven thatthey have been using for over 8 years. If they elect to repair, it will cost the entity$950,000 and either of two outcomes is likely: 1. A 20% probability it will perform okay and generate revenues of$10,000,000, or 2. An 80% chance that it will be partially restored and generate revenue of$2,000,000. If on the other hand however, they purchase a new oven, they can either buy animported oven for $3,500,000 or they can buy a locally made one for $2,200,000.If the elect to purchase the imported oven, production will earn them revenues of$15,550,000, but if they buy the locally made oven, there is a 70% likelihood thatit perform as expected and generate revenues of $12,000,000; and a 30% chancethat it will not and generate revenues of $6,000,000. Required: 1. Draw a decision tree of this problem and determine the expected value.2. Advise the management of the Bakery on how to proceed.3. Briefly discuss the…
- A rural cooperative purchased a trencher at a cost of P230,500.00. It is estimated that the trencher will have a salvage value of P25,000.00 after digging 300,000 meters of irrigation canals. Determine the book value of the trencher after two years, if it was used to dig 50,000 meters on the first year and 75,000 meters on the second year. (Ans. P144,875.00)Ray Holt seeks an investment for his new business. The investor will bear all the costs(fixed + variable) and wants a rate of return of at least Y%. For the business fixed cost is Fc, selling price of a unit is Sp, and Cost of production of a unit is Cp. How many units, x, should Ray Holt maketo meet the investor’s rate of return requirement? If the requested rate of return is 10%, fixed cost is $10,000, selling price is $5, and cost of production is $3, how many units should be made?A group is planning to back the production of a new musical at Lusaka Playhouse. It would cost K100 000 to stage for the first month. If well received by critics, it will be kept on for a further six months earning a profit of K350 000. If critics dislike it, it will close at the end of the first month. There is a 50: 50 chance of a favourable review. Should the group invest in the musical? A business wants to decide whether to launch a new product. If the product is launched there are two elements of uncertainty: 0.70 probability that sales that sales will be 8000 units per month and 0.30 that sales will be 5000 units per month. If sales are 8000 units per month, there is a 0.5 probability that the contribution per unit will be K2 and a 05 probability that it will be negative –K1. With sales of 5000 units there is a 0.6 probability that the contribution per unit will be K3 and a 04 probability that it will be K3 and a 0.4 probability that it will be K1. Advise…
- Suppose that an aircraft manufacturer desires to make a preliminary estimate of the cost of building a 600-MW fossil-fuel plant for the assembly of its new long-distance aircraft. It is known that a 200-MW plant cost $100 million 20 years ago when the approximate cost index was 400, and that cost index is now 1,200. The cost-capacity factor for a fossil-fuel power plant is 0.79.Combined-cycle power plants use two combustion turbines to produce electricity. Heat from the first turbine’s exhaust is captured to heat waterand produce steam sent to a second steam turbine that generates additional electricity. A 968-megawatt combined-cycle gas fired plant can be purchased for $450 million, has no salvage value, and produces a net cash flow(revenues less expenses) of $50 million per year over its expected 30-year life. Solve, a. If the hurdle rate (MARR) is 12% per year, how profitable an investment is this power plant? b. What is the simple payback period for the plant? Is this investment acceptable?The Bainters consider the costs as well as the pros and cons of renting and owning. They consider that they have a stable monthly income and plan to live in the area for a minimum of 15 years. Based on your calculations, as well as the additional factors the Bainters might consider, do you think they should rent or purchase a house? Why? Your answer should include a decision for the Bainters to either rent a house or purchase a house an explanation of why you think they should rent or purchase (include a minimum of three reasons) Keep in mind that either decision may be valid if you fully justify your answer.