Required information[The following information applies to the questions displayed below.]Beacon Company is considering automating its production facility. The initial investment in automation would be $11.45million, and the equipment has a useful life of 9 years with a residual value of $1,100,000. The company will use straight-line depreciation. Beacon could expect a production increase of 46,000 units per year and a reduction of 20 percent inthe labor cost per unit.Production and sales volumeSales revenueVariable costsDirect materialsDirect laborVariable manufacturing overheadTotal variable manufacturing costsContribution marginFixed manufacturing costsNet operating incomeCurrent (noautomation)87,000 unitsNet present valuePerUnit$92$1925953$39Total$ ??$ 1,100,000?Proposed(automation)133,000 unitsPerUnit$92$19?9?$44Total$ ??$ 2,330,000?5. Recalculate the NPV using a 8 percent discount rate. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, PresentValue Annuity of $1.) (Use appropriate factor(s) from the tables provided. Negative amount should be indicated by a minus sign.Enter the answer in whole dollars.)

Net Present Value (NPV) is a financial metric used to determine the profitability of an investment.…

Answered: Beacon Company is considering…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

Barker Production Company is considering the purchase of a flexible manufacturing system. The annual cash benefits/savDecreased waste$ 75,000Increased quality100.000Decrease in operating costs62,500Increase in on-time deliveries12.500The system will cost S750,000 and will last ten years. The company's cost of capital is 10%.What is the payback period for the flexible manufacturing system?What is the NPV for the flexible manufacturing system?
Parmar nil
Analyze the following statement: Modernize the equipment without restructuring the line. This would keep one line in the traditional mode. Since we have modernized our other lines, this is currently our "oldest" line. It has the largest incidence of equipment problems. At an installed cost of $250,000 for new equipment, we can reduce our annual maintenance costs by $35,000. More importantly, productivity should increase by 5% without any increase in operating costs. The line produces nearly 800,000 units per year with a direct manufacturing cost of $5.40 (excluding materials). Although this revamping will extend the life of the line for only ten years, it is unlikely that we can put it off for more than 2 years.
Oahu Inc. is considering an investment in new equipment that will be used to manufacture a smartphone. The phone is expected to generate additional annual sales of 5,100 units at $276 per unit. The equipment has a cost of $521,700, residual value of $39,300, and an 8-year life. The equipment can only be used to manufacture the phone. The cost to manufacture the phone follows: Line Item Description Amount Cost per unit: Direct labor $47.00 Direct materials 182.00 Factory overhead (including depreciation) 31.60 Total cost per unit $260.60 Determine the average rate of return on the equipment. If required, round to the nearest whole percent.
MM currently carries out process B the output from which can be sold for $20 per unit and has variable costs of $7.50 per unit. Process B has directly attributable fixed operating costs of $ 40000 per annum. MM also carries out process C by using equipment that has running costs of $ 25000 per annum. The equipment could be sold now for $50000 (but this would incur dismantling costs of $7500) or in one year’s time for $45000 with dismantling costs of $8750.Process B could be adapted so that it incorporated process C.The existing process B machinery would have to be removed, either now at a dismantling cost of $12500 and with the sale of the machinery for $100000 or in one year’s time for $75000 with dismantling costs of $13750.Alternative process B machinery would have to be leased. This would cost $10000 per annum and have annual fixed costs of $30000.The existing process B machinery originally costs $250000 which bought five years ago. It is being depreciated at 10% per…
Operating costs are an important criteria when selecting what machinery would be the best choice for a company. What is the EUAW of this investment that costs $53,700, has annual benefits of $8,162/year, annual costs of $1,540/year, and a disposal cost of $4,800 at the end of its useful life? It has a useful life of 14 years. Use a 15% MARR.
Personal Engineering has purchased a machine that will see output increase from 2 million units to 5 million units. The variable cost per unit will decrease from $5.00 to $3.00. The sales price per unit is $12. Fixed costs will increase from $1,400,000 per annum to $2,500,000 per annum. Head office costs of $250,000 will be allocated to the new machine but the overall head office costs have not changed with the addition of the new machine. The new machine will require a 3 year, 5% interest only loan of $1m. Depreciation on the machine will be $200,000 per annum. The old Machine that was replaced and still had a useful life of 3 years had annual depreciation of $45,000. The tax rate is 20%. Calculate the FCF in Year 2. Show all workings.
A manufacturer of automated optical inspection devices is deciding on a project to increase the productivity of the manufacturing processes. The estimated costs for the two feasible alternatives being compared are shown below. Use the internal rate of return (IRR) method to determine which alternative should be selected if the analysis period is 8 years and the company's MARR is 4% per year. Alternative M N Initial costs $30,000 $45,000 Net annual cash flow $4,500 $7,000 Life in years 8 8 (a) IRR of base alternative = (b) IRR of incremental cash flow = (c) Choose Alternative
Asap
Can you kindly help show the steps for calculating the Working Capital for a product line capable of producing 1.25 Million units per year, total estimated investment cost for the new line is $25 Million, selling price is fixed for the project life at $125 per unit. Working capital based on a 2.5-month supply of raw materials and 1.5 months of combined inventory (WIP and finished goods)? Variable costs per unit include $35 for materials, $20 for manufacturing, and $18 for labor. There are additional fixed operating and maintenance costs totaling $14.25 Million per year. Salvage value equal to 20% of the purchase price at the end of the 6-year project life. The Federal tax rate is 23% and State tax rate is 8.75%. MARR of 18%. Inflation is expected to increase the variable and fixed costs by 6.4% after the first year. In years 3- 6, inflation is expected to decline by 1.2% each year (year 2 inflation is 6.4%, year 3 is 5.2%, etc.) The project falls under a 7-year MACRS class life. The…

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS