BURKAY casting factory wants to buy a furnace to meet their increasing production demands. As a result of the studies, the data in the table below were found. Based on these data, what will be future value (FV) of the scrap value of alternative A? For Alternative A; Purchase Cost= 10000 Annual Operating Expense= 1500 Scrap Value= 2000 Economic Life= 4 Capital Cost = 10%
Q: Crane Corp. did some further research and found one other possible machine that would produce the…
A: The net present value (NPV) method is used to compute the present value of all future cash flows…
Q: The plant manager of IHK is considering the purchase of a new robotic assemble plant. The new…
A: Given ,Cost of plant- $250,000Direct labour savings- $ 62,500 per yearNumber of years-10a)…
Q: The Uzman Rolling Mill wants to buy a new drill to use in the workshop. As a result of the studies,…
A: Given Purchase Cost= 5000 Annual Operating Expense= 4000 Scrap Value= 1000 Economic Life= 2 Capital…
Q: A casting company is considering the replacement analysis of a furnace. If it is bought from A…
A: The present value of the annuity is the current worth of a cash flow series at a certain rate of…
Q: Karabuk casting factory wants to buy a furnace to meet their increasing production demands. As a…
A: Capital Budgeting: It is the planning process used to determine whether an organization invests for…
Q: AKO Tire Company is evaluating whether it should retain the current melting process that uses a…
A: To calculate the replacement value, NPV is calculated. It is the net current worth of cash flows…
Q: Tulips Ltd is considering the purchase of a new machine that is expected to save labor on an…
A: Note : As per the guidelines, only first three questions will be answered. Kindly post the fourth…
Q: Suppose that you have just completed the mechanical design of an equipment that has an investment…
A: Annual Depreciation (straight line method) = (Cost of the assets - Residual value) / Expected life…
Q: Barker Production Company is considering the purchase of a flexible manufacturing system. The annual…
A: Compute Annual cash inflow or savings: Amount Decreased waste $75,000 Increased quality…
Q: Poly-Chem Plastics is considering two types of injection molding machines: hydraulic and electric.…
A: here to solve this question we have to calculate the IRR of incremental cash flow of both the…
Q: A plant's Product Engineering Department is trying to calculate the Uniform Equivalent Annual Cost…
A: The change in one variable with respect to change in another variable is known as sensitivity…
Q: KARABUK casting factory wants to buy a furnace to meet their increasing production demands. As a…
A: Future Value = Present Value * ( 1 + Capital Cost )economic life
Q: Paulsen Corporation is involved in the evaluation of a new computer-integrated manufacturing system.…
A: Profitability Index is the ratio of Present value of cash inflows to the Initial cost of the…
Q: A firm is considering which of two mechanical devices to install to reduce costs in a particular…
A: Present worth of benefits is a part of cost benefit analysis concept which aims to measure the value…
Q: You must analyze a potential new product—a caulking compound that Cory Materials’ R&D people…
A: Net present value is the difference between present value of all cash inflows and initial investment…
Q: It is desired to determine the present economic value of an old machine by considering of how it…
A: The present value of an equipment can be determined by by discounting the future cash flow of the…
Q: Difend Cleaners has been considering the purchase of an industrial dry-cleaning machine. The…
A: Calculate net present value of the investment.
Q: Dick Dickerson Construction, Inc. has asked you to help them select a new backhoe. You have a choice…
A: Annual worth is the amount which is expected to be generated from the investment on annual basis. By…
Q: A tool and die company in Hanover is considering the purchase of a drill press with fuzzy - logic…
A: Capital budgeting is a way to evaluate the profitability of new projects or investments by using…
Q: The Greenleaf Company is considering purchasing a new set of air-electric quill units to replacean…
A:
Q: A biotech company planning a plant expansion is trying to determine whether it should upgrade the…
A: Salvage value: It is the residual book value of the asset when whole depreciation has been expensed
Q: Alliance Manufacturing Company is considering the purchase of a new automated drill press to replace…
A: Cost of Machine = $25,000 Cost Saving = $6,000 Salvage Value = $1,000 Cost of capital = 14% Tax Rate…
Q: It is desired to determine the present economic value of an old machine by considering of how it…
A: The net present value (NPV) is a calculation used in capital budgeting and investment planning to…
Q: Bailey, Inc., is considering buying a new gang punch that would allow them to produce circuit boards…
A: MARR is the minimum rate that a company is willing to earn from a project. It is also known as the…
Q: company in Hànover is considering the purchase of a drill press with fuzzy-logic software to improve…
A: The decision of choosing a Machine is given on the basis of NPV.
Q: Swifty Hammocks is considering the purchase of a new weaving machine to prepare fabric for its…
A: IRR is given by, PV of cash inflows = initial cost PV = E(1-(1+r)-p)/r Where, E = annual cashflow…
Q: MKM International is seeking to purchase a new CNC machine in order to reduce costs. Two alternative…
A: The company may decide to replace the old asset with a new asset. The company may also have several…
Q: Alliance Manufacturing Company is considering the purchase of a new automated drill press to replace…
A: Since you have posted a question with multiple sub-parts, we will solve the first three subparts for…
Q: Your company is considering investing in a new production machine. Three of the machine's parameters…
A: The question is based on the concept of sensitivity study in capital budgeting. The sensitivity…
Q: A small company that manufactures vibration isolation platforms is trying to decide whether it…
A: The question is based on the concept of replacement analysis to determine Existing system D can be…
Q: The plant manager of IHK is considering the purchase of a new robotic assemble plant. The new…
A: “Hey, since your question has multiple sub-parts, we will solve first three sub-parts for you. If…
Q: A firm is considering the purchase of a new machine to increase the output of an existing production…
A: Given, MARR = 15% Initial investment: Alternative- A = $14,000 B = $65,000…
Q: Dexcon Technologies, Inc., is evaluating two alternatives to produce its new plastic filament with…
A:
Q: The management of Ballard MicroBrew is considering the purchase of an automated bottling machinefor…
A: Simple rate of return It is one of a capital budgeting technique which does not involve discounting…
Q: Karabuk casting factory wants to buy a furnace to meet their increasing production demands. As a…
A: Scrap value is the value of a physical asset at the end of its useful life, that is, it is the value…
Q: Two alternative machines will produce the same product, but one is capable of higher-quality work,…
A: Present worth analysis is an analysis in which we convert all the cash flows to present worth using…
Q: A salad oil bottling plant can either buy caps for the glass bottles at 5 cents each or install…
A: Pay-Back period is traditional tool used to measure viability of investment proposal. PB Period…
Q: You are working for a company which wishes you to evaluate the economic feasibility of producing…
A: “As the question has more than 3 sub-parts, the first 3 subparts are answered. If you want the…
Q: Dexcon Technologies, Inc., is evaluating two alternatives to produce its new plastic filamen with…
A: Solution: - Calculation of present worth for DDM method as follows under: -
Q: A. Micro Processors Ltd is in process of purchasing a high-tech machine for its production of…
A: i. Machine A Machine B State of nature Rate of return [a] Probability [b] Expected return [a…
Q: Garida Co. is considering an investment that will have the following sales, variable costs, and…
A: Since, there are multiple sub-parts, I have answered the first three sub-parts. Please repost…
Q: The Fence Company is setting up a new production line to produce top rails. The relevant data for…
A: Equivalent uniform annual cost(EUAC) refers to the total benefit and cost arising out from the…
Q: Chevrolet Corporation is considering replacing an obsolete machine with a new machine. The new…
A: Formula: Simple rate of return = Net Annual savings in costs / Net initial investment where, Net…
Q: Old Southwest Canning Co. has determined that any one of four machines can be used in its…
A: The rate of return analysis is done to assess the net gain or loss on the investment over the period…
Q: It is desired to determine the present economic value of an old machine by considering of how it…
A: Net Present Value is a technique in Capital budgeting which is used for evaluation of project on the…
Q: The plant manager of IHK is considering the purchase of a new robotic assemble plant. The new…
A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…
BURKAY casting factory wants to buy a furnace to meet their increasing production demands. As a result of the studies, the data in the table below were found. Based on these data, what will be future value (FV) of the scrap value of alternative A?
For Alternative A;
Purchase Cost= 10000
Annual Operating Expense= 1500
Scrap Value= 2000
Economic Life= 4
Capital Cost = 10%
Step by step
Solved in 3 steps
- The J.R. Ryland Computer Company is considering a plant expansion to enable the company to begin production of a new computer product. The companys president must determine whether to make the expansion a medium- or large-scale project. Demand for the new product is uncertain, which for planning purposes may be low demand, medium demand, or high demand. The probability estimates for demand are 0.20, 0.50, and 0.30, respectively. Letting x and y indicate the annual profit in thousands of dollars, the firms planners developed the following profit forecasts for the medium-and large-scale expansion projects. a. Compute the expected value for the profit associated with the two expansion alternatives. Which decision is preferred for the objective of maximizing the expected profit? b. Compute the variance for the profit associated with the two expansion alternatives. Which decision is preferred for the objective of minimizing the risk or uncertainty?Hudson Corporation is considering three options for managing its data warehouse: continuing with its own staff, hiring an outside vendor to do the managing, or using a combination of its own staff and an outside vendor. The cost of the operation depends on future demand. The annual cost of each option (in thousands of dollars) depends on demand as follows: If the demand probabilities are 0.2, 0.5, and 0.3, which decision alternative will minimize the expected cost of the data warehouse? What is the expected annual cost associated with that recommendation? Construct a risk profile for the optimal decision in part (a). What is the probability of the cost exceeding $700,000?Den-Tex Company is evaluating a proposal to replace its HID (high intensity discharge) lighting with LED (light emitting diode) lighting throughout its warehouse. LED lighting consumes less power and lasts longer than HID lighting for similar performance. The following information was developed: a. Determine the investment cost for replacing the 700 fixtures. b. Determine the annual utility cost savings from employing the new energy solution. c. Should the proposal be accepted? Evaluate the proposal using net present value, assuming a 15-year life and 8% minimum rate of return. (Present value factors are available in Appendix A.)
- Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided manufacturing system. The annual net cash benefits and savings associated with the system are described as follows: The system will cost 9,000,000 and last 10 years. The companys cost of capital is 12 percent. Required: 1. Calculate the payback period for the system. Assume that the company has a policy of only accepting projects with a payback of five years or less. Would the system be acquired? 2. Calculate the NPV and IRR for the project. Should the system be purchasedeven if it does not meet the payback criterion? 3. The project manager reviewed the projected cash flows and pointed out that two items had been missed. First, the system would have a salvage value, net of any tax effects, of 1,000,000 at the end of 10 years. Second, the increased quality and delivery performance would allow the company to increase its market share by 20 percent. This would produce an additional annual net benefit of 300,000. Recalculate the payback period, NPV, and IRR given this new information. (For the IRR computation, initially ignore salvage value.) Does the decision change? Suppose that the salvage value is only half what is projected. Does this make a difference in the outcome? Does salvage value have any real bearing on the companys decision?Home Garden Inc. is considering the construction of a distribution warehouse in West Virginia to service its east coast stores based on the following estimates: a. Determine the net present value of building the warehouse, assuming a construction cost of 20,000,000, an annual net cost savings of 4,000,000, and a desired rate of return of 14%. Use the present value tables provided in Appendix A. b. Determine the net present value of building the warehouse, assuming a construction cost of 25,000,000, an annual net cost savings of 2,500,000, and a desired rate of return of 14%. Use the present value tables provided in Appendix A. c. Interpret the results of parts (a) and (b).Southland Corporation’s decision to produce a new line of recreational products resulted in the need to construct either a small plant or a large plant. The best selection of plant size depends on how the marketplace reacts to the new product line. To conduct an analysis, marketing management has decided to view the possible long-run demand as low, medium, or high. The following payoff table shows the projected profit in millions of dollars: What is the decision to be made, and what is the chance event for Southland’s problem? Construct a decision tree. Recommend a decision based on the use of the optimistic, conservative, and minimax regret approaches.
- Thaler Company bought 26,000 of raw materials a year ago in anticipation of producing 5,000 units of a deluxe version of its product to be priced at 75 each. Now the price of the deluxe version has dropped to 35 each, and Thaler is now deciding whether to produce 1,500 units of the deluxe version at a cost of 48,000 or to scrap the project. What is the opportunity cost of this decision? a. 175,000 b. 375,000 c. 48,000 d. 26,000The 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?Caduceus Company is considering the purchase of a new piece of factory equipment that will cost $565,000 and will generate $135,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return In Excel, see Appendix C.
- 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.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).Hemmingway, Inc. is considering a $5 million research and development (R&D) project. Profit projections appear promising, but Hemmingway’s president is concerned because the probability that the R&D project will be successful is only 0.50. Furthermore, the president knows that even if the project is successful, it will require that the company build a new production facility at a cost of $20 million in order to manufacture the product. If the facility is built, uncertainty remains about the demand and thus uncertainty about the profit that will be realized. Another option is that if the R&D project is successful, the company could sell the rights to the product for an estimated $25 million. Under this option, the company would not build the $20 million production facility. The decision tree follows. The profit projection for each outcome is shown at the end of the branches. For example, the revenue projection for the high demand outcome is $59 million. However, the cost of the R&D project ($5 million) and the cost of the production facility ($20 million) show the profit of this outcome to be $59 – $5 – $20 = $34 million. Branch probabilities are also shown for the chance events. Analyze the decision tree to determine whether the company should undertake the R&D project. If it does, and if the R&D project is successful, what should the company do? What is the expected value of your strategy? What must the selling price be for the company to consider selling the rights to the product? Develop a risk profile for the optimal strategy.