FootballComm LLC is a manufacturer of devices for football coaches and their coaching staffs that enables them to quickly and effectively communicate with oneanother during a game through a wireless sideline headset system. Currently, the company purchases all of the headsets included in their systems from aChina-based supplier, but they have experienced a significant decrease in overall headset quality. To correct the problem, the company is considering producingtheir own headsets in-house. The company estimates that the transition will take place over 12 months. The system is expected to have an eight-year service lifeand produce savings and expenditures given in the table below.If the firm's MARR is 15%, use the NPW method to calculate the economic worth of producing the headsets in house.In-House Headset ManufacturingSingle PaymentCompound PresentAmountInvestmentWorthFactorCompoundAmountFactor(F/A, i, N)FactorNow (building)$500,000$2,200,000(F/P, i, N)(P/F, i, N)First year (equipment andfacilities)1.15000.86961.00001.32252.15000.7561Annual savings in materials and$5,000,0001.5209quality inspection0.65753.4725Incremental annual expenses$1,500,0001.74900.57184.9934Incremental annual income taxes$800,0002.01140.49726.7424Economic service life8 years$1,500,000Net salvage value2.31310.43238.75372.66000.375911.06683.05900.326913.72683.51790.284316.78584.04560.247220.3037The economic worth of producing the headsets in house is $ thousand.•WN-Z45678910Equal Payment SeriesSinking PresentFundWorthFactorFactor(A/F, i, N)(P/A, i, N)0.86961.00000.46511.62570.28802.28320.20032.85500.14833.35220.11423.78450.09044.16040.07294.48730.05964.77160.04935.0188CapitalRecoveryFactor(A/P, i, N)1.15000.61510.43800.35030.29830.26420.24040.22290.20960.1993

Introduction: NPW: A set of working capital occurring at various dates is given a net present worth…

FootballComm LLC is a manufacturer of devices for football coaches and their coaching staffs that enables them to quickly and effectively communicate with one another during a game through a wireless sideline headset system. Currently, the company purchases all of the headsets included in their systems from a China-based supplier, but they have experienced a significant decrease in overall headset quality. To correct the problem, the company is considering producing their own headsets in-house. The company estimates that the transition will take place over 12 months. The system is expected to have an eight-year service life and produce savings and expenditures given in the table below. If the firm's MARR is 15%, use the NPW method to calculate the economic worth of producing the headsets in house. D In-House Headset Manufacturing Investment Worth Factor Compound Amount Factor (F/A, i, N) Now (building) Single Payment Compound Present Amount Factor (F/P, i, N) 1.1500 1.3225 1.5209 $500,000 $2,200,000 (P/F, i, N) First year (equipment and facilities) 0.8696 1.0000 2.1500 0.7561 $5,000,000 Annual savings in materials and quality inspection 0.6575 3.4725 Incremental annual expenses $1,500,000 1.7490 0.5718 4.9934 2.0114 Incremental annual income taxes Economic service life 0.4972 $800,000 8 years 6.7424 Net salvage value $1,500,000 2.3131 0.4323 8.7537 2.6600 0.3759 11.0668 3.0590 0.3269 13.7268 3.5179 0.2843 16.7858 4.0456 0.2472 20.3037 2123 N 4 5 6 7 8 9 10 Equal Payment Series Sinking Present Fund Worth Factor Factor (A/F, I, N) (P/A, i, N) 0.8696 1.0000 0.4651 1.6257 0.2880 2.2832 0.2003 2.8550 0.1483 3.3522 0.1142 3.7845 0.0904 4.1604 0.0729 4.4873 0.0596 4.7716 0.0493 5.0188 Capital Recovery Factor (A/P, i, N) 1.1500 0.6151 0.4380 0.3503 0.2983 0.2642 0.2404 0.2229 0.2096 0.1993

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter10: Cost Analysis For Management Decision Making

Section: Chapter Questions

Problem 14P