NAPOCOR is considering to put up power lines in an area between two points. There are two options which is to build the lines along the road, or build it across a mountainous area which will give a shorter distance. Costing of each as as follows Road route Mountain Route Length(kms) 50.00 25.00 Cost/km 40,000.00 68,000.00 Maintenance/km 1,200.00 4,300.00 Interest on cash 0.10 0.10 Тах 0.03 0.03 Salvage Val/mi 12,000.00 22,000.00 Life 15.00 15.00

NAPOCOR is considering to put up power lines in an area between two points. There are two options which is to build the lines along the road, or build it across a mountainous area which will give a shorter distance. Costing of each as as follows Road route Mountain Route Length(kms) 50.00 25.00 Cost/km 40,000.00 68,000.00 Maintenance/km 1,200.00 4,300.00 Interest on cash 0.10 0.10 Тах 0.03 0.03 Salvage Val/mi 12,000.00 22,000.00 Life 15.00 15.00

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter15: Decision Analysis

Section: Chapter Questions

Problem 5P: Hudson Corporation is considering three options for managing its data warehouse: continuing with its...

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The operation manager at Sebago manufacturing is considering three proposals for supplying a critical component for its new line of electric watercraft. Proposal 1 is to purchase the component; proposal 2 is to make the component in house rebuilt equipment; and proposal 3 is to purchase new, highly automated equipment. The costs associated with each proposals are provided. At what quantity range will each option be preferred? propsal 1 annual cost of capital = 0 variable cost of each $22.00 proposal 2 annual cost of capital = $150,000 variable cost = $14.00 prosal 3 annual cost of capital = $450,000 variable cost = $12.50
San Juan, Incorporated, is considering two alternatives: A and B. The costs associated with the alternatives are listed below: Alternative A Alternative B Material costs $ 35,000 $ 57,000 Processing costs 36,000 57,000 Building costs 12,000 28,000 Equipment rental 19,000 19,000 Are the materials costs and processing costs differential in the choice between alternatives A and B? Multiple Choice Neither materials costs nor processing costs are differential. Both materials costs and processing costs are differential. Only processing costs are differential. Only materials costs are differential.
Garida Co. is considering an investment that will have the following sales, variable costs, and fixed operating costs: Year 1 Year 2 Year 3 Year 4 Unit sales 4,200 4,100 4,300 4,400 Sales price $29.82 $30.00 $30.31 $33.19 Variable cost per unit $12.15 $13.45 $14.02 $14.55 Fixed operating costs $41,000 $41,670 $41,890 $40,100 This project will require an investment of $10,000 in new equipment. Under the new tax law, the equipment is eligible for 100% bonus deprecation at t = 0, so it will be fully depreciated at the time of purchase. The equipment will have no salvage value at the end of the project’s four-year life. Garida pays a constant tax rate of 25%, and it has a weighted average cost of capital (WACC) of 11%. Determine what the project’s net present value (NPV) would be under the new tax law. Determine what the project’s net present value (NPV) would be under the new tax law. $80,438 $67,032 $77,087 $60,329 Now…
The operations manager at Sebago Manufacturing is considering three proposals for supplying a critical component for its new line of electric watercraft. Proposal one is to purchase the component, proposal two is make the component in-house using rebuilt equipment, and proposal three is to purchase new, highly automated equipment. The costs associated with each proposal are provided in the table below. Proposal Annual cost ofcapital required Variable cost ofeach component One: purchase $0.00 $22.00 Two: make with rebuiltequipment $150,000.00 $14.00 Three: make with newequipment $450,000.00 $12.50 At what quantity range will each option be preferred?
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?
The 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?
A company that produces pleasure boats has decided to expand one of its lines. Current facilities are insufficient to handle the increased workload, so the company is considering three alternatives, A (new location), B (subcontract), and C (expand existing facilities). Alternative A would involve substantial fixed costs but relatively low variable costs: fixed costs would be $254,000 per year, and variable costs would be $500 per boat. Subcontracting would involve a cost per boat of $2,500 and fixed cost of $25,000 and expansion would require an annual fixed cost of $120,000 and a variable cost of $1,000 per boat. Which alternative would yield the lowest total cost for an expected annual volume of 150 boats?
All parts are under one question and therefore can be answered in full per your policy. 4. Analysis of a replacement project At times firms will need to decide if they want to continue to use their current equipment or replace the equipment with newer equipment. The company will need to do replacement analysis to determine which option is the best financial decision for the company. Price Co. is considering replacing an existing piece of equipment. The project involves the following: • The new equipment will have a cost of $600,000, and it is eligible for 100% bonus depreciation so it will be fully depreciated at t = 0. • The old machine was purchased before the new tax law, so it is being depreciated on a straight-line basis. It has a book value of $200,000 (at year 0) and four more years of depreciation left ($50,000 per year). • The new equipment will have a salvage value of $0 at the end of the project's life (year 6). The old machine has a current salvage value (at…
MKM International is seeking to purchase a new CNC machine in order to reduce costs. Two alternative machines are in consideration. Machine 1 costs $450,000, but yields a 15 percent savings over the current machine used. Machine 2 costs $800,000, but yields a 25 percent savings over the current machine used. In order to meet demand, the following forecasted cost information for the current machine is also provided. LOADING... Year Project Cost 1 1,000,000 2 1,350,000 3 1,450,000 4 1,550,000 5 2,550,000 a. Based on the NPV of the cash flows for these 5 years, which machine should MKM International purchase? Assume a discount rate of 12 percent. Assuming a discount rate of 12 percent, MKM International should purchase ▼ machine 1 or machine 2 because the NPV of machine 1 is $------ and the NPV of machine 2 is $--------. (Enter your responses…
You have been tasked with recommending one of the mutually exclusive industrial sanitation control systems summarized below. The life of both alternatives is 30 years, and residual salvage values are negligible. Use the benefit–cost ratio method in your analysis. If the MARR is 8% per year, which answer below would you recommend? Solve, (a) Gravity-fed (b) Vacuum-led(c) Both systems (d) Neither system.
. In connection with surfacing a new highway, acontractor has a choice of two sites on which toset up the mixing plant equipment.The contractor estimates that it will cost P51.75per cubic meter per kilometer to haul the asphaltpaving material from the mixing plant to the jobsite.If site B is selected, there will be an addedcharge of P600 per day for a flagman and it needs 2 flagman.The job requires 50,000 cubic meters of mixedasphalt paving material. It is estimated that fourmonths (17 weeks of five working days perweek) will be required for the job.
The 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 7%, and the projects' expected net costs are listed in the following table: Expected Net Cost Year Conveyor Forklift 0 -$500,000 -$200,000 1 -120,000 -160,000 2 -120,000 -160,000 3 -120,000 -160,000 4 -120,000 -160,000 5 -20,000 -160,000 What is the IRR of each alternative? The IRR of alternative 1 is -Select-undefined 5% 7% 9% Item 1 . The IRR of…