Artisan Metalworks has a bottleneck in their production that occurs within the engraving department. Jamal Moore, the COO, is considering hiring an extra worker, whose salary will be $55,000 per year, to solve the problem. With this extra worker, the company could produce and sell 3,000 more units per year. Currently, the selling price per unit is $25 and the cost per unit is $7.85. Using the information provided, calculate the annual financial impact of hiring the extra worker.

Artisan Metalworks has a bottleneck in their production that occurs within the engraving department. Jamal Moore, the COO, is considering hiring an extra worker, whose salary will be $55,000 per year, to solve the problem. With this extra worker, the company could produce and sell 3,000 more units per year. Currently, the selling price per unit is $25 and the cost per unit is $7.85. Using the information provided, calculate the annual financial impact of hiring the extra worker.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 7E

See similar textbooks

Similar questions

Quick Computing currently sells 10 million computer chips each year at a price of $20 per chip. It is about to introduce a new chip, and it forecasts annual sales of 12 million of these improved chips at a price of $25 each. However, demand for the old chip will decrease, and sales of the old chip are expected to fall to 3 million per year. The old chips cost $6 each to manufacture, and the new ones will cost $8 each. What is the proper cash flow to use to evaluate the present value of the introduction of the new chip? Note: Enter your answer in millions.
Parker County Community College (PCCC) is trying to determine whether to use no insulation or to use insulation that is either 1 inch thick or 2 inches thick on its steam pipes. The heat loss from the pipes without insulation is expected to cost $1.50 per year per foot of pipe. A 1-inch thick insulated covering will eliminate 89% of the loss and will cost $0.40 per foot. A 2-inch thick insulated covering will eliminate 92% of the loss and will cost $0.85 per foot. PCCC Physical Plant Services estimates that there are 250,000 feet of steam pipe on campus. The PCCC Accounting Office requires a 10%/year return to justify capital expenditures. The insulation has a life expectancy of 10 years. Determine which insulation (if any) should be purchased using annual worth analysis.
Corcoran Consulting is deciding which of two computer systems to purchase. It can purchase state-of-the-art equipment (System A) for $20,000, which will generate cash flows of $6,000 at the end of each of the next 6 years. Alternatively, the company can spend $12,000 for equipment that can be used for 3 years and will generate cash flows of $6,000 at the end of each year (System B). If the company’s WACC is 10% and both “projects” can be repeated indefinitely, which system should be chosen, and what is its EAA?
An electric automobile can be purchased for $25,000. The automobile is estimated to have a life of 12 years with annual mileage of20,000 miles. Every three years, a new set of batteries will have to be purchased at a cost of $3,000. The $3,000 cost of the batteries is a net value with the old batteries traded in for the new ones. Annual maintenance of the vehicle is estimated to cost $700. The cost of recharging the batteries is estimated at $0.015 per mile. The salvage value of the batteries and the vehicle at the end of 12 years is estimated at $2,000. Consider the MARR to be 7%. What is the cost per mile to own and operate this vehicle according to these estimates?
Carlisle Company has been cited and must invest in equipment to reduce stack emissions or face EPA fines of $22,500 per year. An emission reduction filter will cost $95,000 and will have an expected life of 5 years. Carlisle’s MARR is 9 %/year. What is the present worth of this investment? $Carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar. The tolerance is ±5.
Electric posts and transmission lines must be installed in a new industrial park. It has been estimated that 23 km of transmission lines will be needed and each kilometer of line costs P14,000.00 including the installation. In addition a pole must be placed every 100 meters on the average to support the lines, and the cost of the pole and its installation is P2,100.00 including labor. What is the cost of the entire project?
Vandelay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $3,140,000 and will last for six years. Variable costs are 36 percent of sales, and fixed costs are $280,000 per year. Machine B costs $5,364,000 and will last for nine years. Variable costs for this machine are 31 percent of sales and fixed costs are $205,000 per year. The sales for each machine will be $11.7 million per year. The required return is 9 percent, and the tax rate is 22 percent. Both machines will be depreciated on a straight-line basis. The company plans to replace the machine when it wears out on a perpetual basis. Calculate the EAC for each machine. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) Systeme A Systeme B Which machine should the company choose? multiple choice Machine B…
eBook Net Present Value Method—Annuity Take a Load Off Hotels is considering the construction of a new hotel for $12,000,000. The expected life of the hotel is 6 years with no residual value. The hotel is expected to earn revenues of $12,400,000 per year. Total expenses, including straight-line depreciation, are expected to be $10,000,000 per year. Take a Load Off's management has set a minimum acceptable rate of return of 12%. a. Determine the equal annual net cash flows from operating the hotel.$fill in the blank 1 b. Calculate the net present value of the new hotel, using the present value factor of an annuity of $1 table below. If required, round to the nearest dollar. If the net present value is negative, enter the amount using a minus sign. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791…
Chemitronix Ltd. is a microchips manufacturing company. It was found that the business is at the maturity stage, demanding some change. After rigorous research, management came up with the following decision variables.Expansion: 45% chance of gaining 1,500,00; 55% chance of losing XNew Product: 50% chance of gaining 900,000; 50% chance of losing 539740What must have been the value of expansion loss if expansion and new product will result to the same expected monetary values?
An integrated, combined cycle power plant produces 285MW of electricity by gasifying coal. The capital investment for the plant is $570 million, spread evenly over two years. The operating life of the plant is expected to be 20 years. Additionally, the plant will operate at full capacity 75% of the time (downtime is 25% of any given year). a. If this plant will make a profit of three cents per kilowatt-hour of electricity sold to the power grid, what is the simple payback period of the plant? Is it a low-risk venture? Tabulate the net cash flow and the cumulative PW. b. What is the IRR for the plant? Is it profitable?
A company is currently paying its employees$0.56 per mile to drive their own cars on companybusiness. The company is considering supplyingemployees with cars, which would involve purchasing at $25,000 with an estimated three-year life, a netsalvage value of $8,000, taxes and insurance at a costof $1,200 per year, and operating and maintenanceexpenses of $0.30 per mile. If the interest rate is 10%and the company anticipates an employee’s annualtravel to be 30,000 miles, what is the equivalent costper mile (neglecting income taxes)
Dupont is considering licensing a low liquid discharge (LLD) water treatment system from a small company that developed the process and owns the license. Dupont can purchase a 1-year option for $100,000 that will provide time to pilot test the LLD process or Dupont can acquire the license now at a cost of $1.8 million plus 25% of sales paid annually to the license owner. If they wait 1 year, the cost will increase to $1.9 million plus 30% of sales paid annually. If sales are estimated to be $1,000,000 per year over the 5-year license period, should Dupont purchase the license now or purchase the option now and possibly license it after the 1-year test period? Assume the MARR is 15% per year.