Stayner Catering is considering setting up a temporary division to handle demand created by its city's special tourist promotion during the coming year. The company will invest in tables, serving equipment, and trucks for a one-year period. Labour is employed on a monthly basis. Warehouse space is rented monthly and revenue is generated monthly. The items purchased will be sold at the end of the year, but the salvage values are somewhat uncertain. Given below are the known or expected cash flows for the project. For an interest rate of 6 percent compounded monthly, create a spreadsheet that calculates the present worth of the project for a range of salvage values of the purchased items from 0 percent to 100 percent of the purchase price. When should Stayner Catering go ahead with this project? Click the icon to view the expected cash flows. Complete the table below. (Round to the nearest dollar as needed. Do not include the $ symbol in your answers.) Salvage % Project PW 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Stayner Catering should go ahead with this project

Stayner Catering is considering setting up a temporary division to handle demand created by its city's special tourist promotion during the coming year. The company will invest in tables, serving equipment, and trucks for a one-year period. Labour is employed on a monthly basis. Warehouse space is rented monthly and revenue is generated monthly. The items purchased will be sold at the end of the year, but the salvage values are somewhat uncertain. Given below are the known or expected cash flows for the project. For an interest rate of 6 percent compounded monthly, create a spreadsheet that calculates the present worth of the project for a range of salvage values of the purchased items from 0 percent to 100 percent of the purchase price. When should Stayner Catering go ahead with this project? Click the icon to view the expected cash flows. Complete the table below. (Round to the nearest dollar as needed. Do not include the $ symbol in your answers.) Salvage % Project PW 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Stayner Catering should go ahead with this project

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Unequal Lives The Perez Company has the opportunity to invest in one of two mutually exclusive machines that will produce a product it will need for the foreseeable future. Machine A costs $9 million but realizes after-tax inflows of $3.5 million per year for 4 years. After 4 years, the machine must be replaced. Machine B costs $14 million and realizes after-tax inflows of $3 million per year for 8 years, after which it must be replaced. Assume that machine prices are not expected to rise because inflation will be offset by cheaper components used in the machines. The cost of capital is 8%. Using the replacement chain approach to project analysis, by how much would the value of the company increase if it accepted the better machine? Do not round intermediate calculations. Enter your answer in millions. For example, an answer of $1.23 million should be entered as 1.23, not 1,230,000. Round your answer to two decimal places. million What is the equivalent annual annuity for each machine?…
A potential project is currently under review. An initial investment of $87,000 would be necessary for equipment. The annual revenues and expenses are expected to be $40,000 and $19,000 each year, respectively, over the 6-year project period. The salvage value of the equipment at the end of the project period is projected to be $17,000. Assume a MARR of 9%. Find the AW (directly - do not convert from either FW or PW - to the nearest cent).
A company is considering pursuing a project with an initial cost of $200,000 annual operating and maintenance costs of $40,000, and annual sales revenues (income) of $80,000 . The project has a useful life of 9 years and will have no salvage value after 9 years .What is the conventional payback period for this project?
A factory manager is considering the purchase of one of the following two production equipment. Cash flow estimates for equipment A are in year-zero dollars while those of equipment B are in actual dollars. Equipment A (year-zero $) Initial investment Net annual revenue $9,800 $3,000 Market value at end of useful life Useful life, years $0 12 Equipment B (actual $) $11,200 $4,000 $0 12 The manager uses a market interest rate of 12% per year. If inflation rate is expected to average 7.69% per year over the next several years, determine the PW of each equipment. 1. The PW of Equipment A is A. $18,355 B. $13,176 ○ C. $12,800 ○ D. $8,783 2. The PW of Equipment B is ○ A. $15,200 B. $26,340 ○ C. $13,577 OD. $19,435
8.35 Emerson Electric is considering the purchase of equipment that will allow the company to manufacture a new line of wireless devices for home appliance control. The fırst cost will be $80,000 and the life estimated is 6 years with a salvage value of $10,000. Three different salespeople have provided estimates regarding the added revenue the equipment will generate. Salespersons 1,2, and 3 have made estimates of $10,000, $16,000, and $18,000 per year, respectively. If the company's MARR is 8% per year, use a PW=based relation to perform a sensitivity analysis to assist in the decision to purchase the equipment. This question is in four parts. Part 1: Using Salesperson 1 estimate of $10,000 per year, what is the present worth (PW) of this scenario? (your answer should be a positive or negative number and do not use commas or $ signs)
Given the following information, find the optimal indefinite plan. MARR = 12%. %3D ND* = 2, Nc* = 4 AECD* > AECC AECC• = 5030 The Marginal Cost (cost for the n'th year) for the defender for given years are below n=1 n=2 n=3 n=4 n=5 n=6 n=7 n=8 MCD 4930 5000 5260 5500 5900 6440 O ljo, 0),(j, 4).∞ (jo, 1).(j, 4). (jo, 2).(j, 4).. O Go, 3).(j, 4). O Gio. 5).G, 4)0 None of the above
Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheap purification system for $12 million. The system will last 3 years. Do-It-Right sells a sturdier but more expensive system for $20 million; it will last for 8 years. Both systems entail $2 million in operating costs; both will be depreciated straight-line to a final value of zero over their useful lives; neither will have any salvage value at the end of its life. The firm's tax rate is 30%, and the discount rate is 10%. a. What is the equivalent annual cost of investing in the cheap system? Note: Do not round intermediate calculations. Enter your answer as a positive value.Enter your answer in millions rounded to 2 decimal places. b. What is the equivalent annual cost of investing in the more expensive system? Note: Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in millions rounded to 2 decimal places. c. Which system should…
A company is planning to install a new automated plastic- molding press. Two different presses are available. Information for these two mutually exclusive alternatives are as follows: Press 1 Press 2 Investment cost $49,600 ??? Annual expenses $25,192 $22,880 Reject rate 2.6% 5.6% Both presses are capable of producing 120,000 units per year. Non-defective units are sold for $0.375/unit (rejected units are worthless); the selected analysis period is five years; and the MARR = 10%. Find the breakeven investment cost of Press 2.
To compare the machines on the basis of present worth analysis, the present worth values to use are: (Include answer, diagram, procedure, and result) O PWx = $31,139, PWy = $43.066 O PWX =$31,139, PWy= $37,461 O PWx= $54,533, PWy = $43,066 O PWx = $54,533. PWy = $37,461
An appliance manufacturing company intends to produce three models of electric fans. These models are the Stand Fan, Wall Fan, and Ceiling Fan. The table below shows the available information on these three models. Stand Fan P 750.00 P 300.00 How many units of each model should be sold each month to breakeven? Type of Cost Selling Price/Unit Variable Cost/Unit Wall Fan P 500.00 P 250.00 Ceiling Fan P 1,000.00 P 500.00 What are the breakeven sales each month?
Artisan Metalworks has a bottleneck in their production that occurs within the engraving department. Jamal Moore, the COO, is considering hiring an extra worker, whose salary will be $55,000 per year, to solve the problem. With this extra worker, the company could produce and sell 3,000 more units per year. Currently, the selling price per unit is $25 and the cost per unit is $7.85. Using the information provided, calculate the annual financial impact of hiring the extra worker.
You are about to buy a piece of equipment (machine Alpha) for a project. The initial cost is $500,000 and the annual maintenance costs is $15,000. Another company offers you a second option (Machine Beta) for which the annual maintenance cost is $20,000. What is the maximum price (the initial cost) you would be willing to pay for the second option? Both machines have the same useful life of 11 years and the difference between their performances is negligible. Assume an annual interest rate of 4%. $767,524 $667,197 $456,197 $567,524