Kwong Yuen Company is ready to buy an office unit. The company has $1,800,000 for the (1) down payment, (2) costs related to bank loan, and (3) interior renovation cost. Costs related to bank loan are estimated to be 6% of the loan value. Interior renovation cost is estimated to be $880,000. The company has an annual EBIT of $960,000 and the bank is willing to allow monthly mortgage payment not higher than 40% of the monthly EBIT. The interest rate on the 26-year instalment loan is 5.27% per year with monthly compounding. a) Identify the Effective Annual Rate of the instalment loan. b) Find out how much the bank loan could be. (Take numbers in full during the process of calculation. Show the final answer with two decimal places.) c) Find out the price of the office unit the company could afford, taking the costs related to bank loan and interior renovation cost into consideration.

Kwong Yuen Company is ready to buy an office unit. The company has $1,800,000 for the (1) down payment, (2) costs related to bank loan, and (3) interior renovation cost. Costs related to bank loan are estimated to be 6% of the loan value. Interior renovation cost is estimated to be $880,000. The company has an annual EBIT of $960,000 and the bank is willing to allow monthly mortgage payment not higher than 40% of the monthly EBIT. The interest rate on the 26-year instalment loan is 5.27% per year with monthly compounding. a) Identify the Effective Annual Rate of the instalment loan. b) Find out how much the bank loan could be. (Take numbers in full during the process of calculation. Show the final answer with two decimal places.) c) Find out the price of the office unit the company could afford, taking the costs related to bank loan and interior renovation cost into consideration.

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

Chapter1: Introduction And Goals Of The Firm

Section: Chapter Questions

Problem 2.2CE

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Question 7 (Breakeven Analysis) You decided to sell Only coffee using Nespresso machine during Ramadan The Nespresso Machine Cost is 3,000 SAR Every cup of coffee required one brown sugar that cost 0.5 SAR, one disposable cup costs 1.5 SAR, and one coffee capsule costs 3 SAR If you sell one coffee for 10 SAR Option 1 Option 2 No Employee Sales quantity = 1500 per month Selling Price 10 SAR per coffee One more Employee and his salary is 4000 Expected sales quantity = 2500 per month Selling Price 10 SAR per coffee What is the breakeven quantity? What is the breakeven quantity? What is the profit? What is the profit? Which option is better?
2.4.1 Total Cost in Material SelectionIn many cases, economic selection among materials cannot be based solely on the costs ofmaterials. Frequently, a change in materials will affect the design and processing costs, and shipping costsmay also be altered.Care should be taken in making economic selections between materials to ensure that anydifferences in shipping costs, yields, or resulting scrap are taken into account. Commonly, alternativematerials do not come in the same stock sizes, such as sheet sizes and bar lengths. This may considerablyaffect the yield obtained from a given weight of material. Similarly, the resulting scrap may differ forvarious materials.In addition to deciding what material a product should be made of, there are often alternativemethods or machines that can be used to produce the product, which, in turn, can impact processingcosts. What could be the factors affecting the cost of materials that one should consider?
The following information for 2021 and 2020 is presented for BuyRite: December 31 Assets Current assets: 2021 2020 Cash $ 42,000 $ 54,000 Accounts receivable 580,000 445,000 Inventory 5,010,000 4,950,000 Prepaid expenses 84,000 79,000 Total current assets 5,716,000 5,528,000 Building and equipment, net 1,097,000 1,095,000 Total assets $6,813,000 $6,623,000 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 605,000 $ 628,000 Bank loan payable 679,000 625,000 Other accrued payables 215,000 315,000 Total current liabilities 1,499,000 1,568,000 Long-term debt 1,729,000 1,791,000 Total liabilities 3,228,000 3,359,000 Stockholders’ equity: Common stock 1,307,000 1,307,000 Retained earnings 2,278,000 1,957,000 Total stockholders’ equity 3,585,000 3,264,000 Total liabilities…
n Project A Project B 0 -$7,000 -$5,000 1 -$2,500 -$2,000 2 -$2,000 -$2,000 3 -$1,500 -$2,000 4 -$1,500 -$2,000 5 -$1,500 -$2,000 6 -$1,500 -$2,000 7 - -$2,000 8 - - Suppose projects A and B are mutually exclusive. The required service period is 8 years and comparable equipment will be leased for $3,000 per year payable at the end of each year for the remaining years of the required service period. Which project is a better choice at 15%? Use PW(15%) criterion and show your equation with numbers plugged into factors and your numerical result for each option.
Find the Present Worth of each of the option Investment: $10 million Annual Revenue: $103 million Breakdown: a) Ticket sales: $68 millionb) VIP Memberships: $13 million Concession revenues: $22 million Annual Costs: $75 million Breakdown: a) Maintenance: $35 millionb) Salaries: $8 millionc) Concession costs: $6 million d) Event Operations: $10 million e) Overhead: $16 million Major Maintenance Update every 20 years: $20 million GIVEN ASSUMPTIONS While any renovation is taking place, the stadium will be closed and there will be no annual revenue or annual costs It is estimated that all Annual Revenues grow at a rate of 1% per year, and all Annual Costs grow at a rate of 0.8% per year The MARR is 5% The stadium will only be used for 50 years after it is done being upgraded, and at that point it will have no salvage value.
Saxon Products, Incorporated, is investigating the purchase of a robot for use on the company’s assembly line. Selected data relating to the robot are provided below: Cost of the robot $ 1,800,000 Installation and software $ 470,000 Annual savings in inventory carrying costs $ 214,000 Annual increase in power and maintenance costs $ 34,000 Salvage value in 5 years $ 74,000 Useful life 5 years In addition to the data above, engineering studies suggest that use of the robot will result in a savings of 29,000 direct labor-hours each year. The labor rate is $14 per hour. Also, the smoother work flow made possible by the use of automation will allow the company to reduce the amount of inventory on hand by $404,000. This inventory reduction will take place at the end of the first year of operation; the released funds will be available for use elsewhere in the company. Saxon Products has a 16% required rate of return. Click here to view Exhibit 14B-1 and Exhibit…
Canuck Oil Corporation is a Canadian crude oil producer. Today is July 15. Canuck’s estimated oil production level in three months’ time will be 100,000 barrels. The current spot price for crude oil is US$90.29 per barrel. Between January 15 and now, crude oil prices have fluctuated from a high of $110.82 to a low of $90.56. Due to the unstable nature of crude oil prices, Canuck Oil’s financial manager, Mr. Petro Stark would like to hedge the crude price risk using crude oil futures contracts. Petro found the following information on futures contracts expiring in September, October, and November: Delivery month Last Change Prior settlement Open High Low Volume September 90.79 –0.58 91.37 91.24 91.44 89.76 9067 October 92.18 –0.48 92.66 92.89 95.22 89.30 5229 November 90.13 –0.35 90.48 90.22 90.55 89.08 1685 Contract size: 1,000 barrels Contract currency: US dollar September expiry: September 16 October…
The Superior Jumpdrive Company sells jump drives for $10 each. Manufacturing cost is $2.60 per jump drive; marketing costs are $2.40 per jump drive, and royalty payments are 20% of the selling price. The fixed cost of preparing the jump drive is $18,000. Capacity is 15 000 jump drives. a. Compute i. the contribution margin ii. the contribution rate. b. Compute the break-even point i. in units ii. in dollars iii. as a percent of capacity. c. Draw a detailed break-even chart d. Determine the break-even point in units if fixed costs are increased by $1600 while manufacturing cost is reduced by $0.50per jump drive. Determine the break-even point in units if the selling price is increased by 10%, while fixed costs are increased by $2900.
You are the FPE at a petroleum plant and are overseeing the design and installation of a new fire pump. There are two separate options an electric pump and a diesel pump. The electric pump includes an initial investment of $5,000,000 with a yearly maintenance of $150,000. The diesel pump includes an initial investment of $3,500,000 with a yearly maintenance of $400,000. Assume both pumps have a life expectancy of 10 years and the interest rate is 6%. Which system is the most desirable? The electric pump because it costs approximately $340,000 less than the diesel pump. The electric pump because it costs approximately $520,000 less than the deisel pump. The diesel pump because it costs approximately $520,000 less than the electric pump. The diesel pump because it costs approximately $340,000 less than the electric pump.
Use Excel to solve this problemAn elevator company has redesigned their product to be 50% more energy efficient thanhydraulic designs. Two designs are being considered for implementation in a newbuilding.
I want you to provide me the Cash Flow diagram of the problem. Only cash flow diagram, the solution is already there. Thanks in advance! The annual estimated cash flow is $140,000. The salvage value will be 12% of the initial price after 5 years. The discount rate (r) is 18% Let us assume the initial price of the doughnut machine be X. PV of cash inflows=PV of cash outflows$140,000×PVAF4,18%+.12X×PVF5,18%=X$140,000×2.69006180465+.12X×0.43710921621=X$376,608.652651=X-0.05245310594$376,608.652651=0.94754689406XX=$397,456.479475 The maximum purchase price of the doughnut machine is $397,456.48.
Prob.#1 At the Motorola plant in Mesa, AZ, it is desired to determine whether one-inch-thick insulation or two-inch-thick insulation should be used to reduce heat loss from a long section of steam pipe. The heat loss from the pipe without any insulation would cost $2.00 per linear foot per year. The one- inch-thick insulation option will eliminate 88% of the heat loss and will cost $0.60 per foot. Two-inch insulation will eliminate 95% of the heat loss and will cost $1.10 per foot. The steam pipe is 1,000 feet in length and will last 10 years. MARR is 6% per year. Which insulation thickness should be recommended? Apply Equivalent Uniform Annual Worth technique. please show all work for each type.