Answered: the process for producing a fruit-tree…

the process for producing a fruit-tree pesticide has a first cost of $200,000 with annual costs of $50,000 and revenue of $90,000 per year. What is the payback period in years?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 3EB: A restaurant is considering the purchase of new tables and chairs for their dining room with an...

See similar textbooks

Related questions

Q: A specialized machine essential for a company's operations costs $5,000 and has operating costs of…

Q: The firm is considering two machines: Machine A with initial investment of $10,000 and annual…

A: Equivalent annual cost (EAC) is the cost per year for owning or maintaining an asset over its…

Q: The plant manager at a company would like to perform an analysis for a new $250,000 machine. If she…

A: Payback period method is a traditional method used in capital budgeting decisions which is used to…

Q: If a trenching machine has an estimated life span of 7500 hours and a yearly operating cost of…

A: Hourly cost can be calculated using the formula given below. Hourly cost = Total cost in One year /…

Q: Use the following for the next 2 questions: A facility is to be built with construction costs of…

A: Variable cost means the cost which vary with the level of output and fixed cost means the cost which…

Q: A new manufacturing plant costs $5 million to build. Operating and maintenance costs are estimated…

A: Let X = number of units to be sold per day to break even. At break even, Total cost - Total revenue…

Q: A machine has a first cost of $180,000. Its ervice life is 10 years when it can be sold

A: in this problem we have to calculate total present value of all cost and than find out equivalent…

Q: A piece of new equipment has been proposed by engineers to increase the productivity of a certain…

A: Present Worth Present value is the present worth of any sum of money to be received in the future at…

Q: The equipment needed to manufacture a product costs $1,000,000 to purchase. This equipment has a…

A: SOLUTION- BREAK EVEN POINT IS THE POINT AT WHICH TOTAL REVENUE EQUALS TO TOTAL COST OR EXPENSES.

Q: The maintenance of a machine in a manufacturing plant currently costs a company $9,000 every year…

A: Cash Flow Comparison with existing and new machine: Year Existing Cash Flows Proposed Cash Flows…

Q: Plato Pharmaceuticals Ltd has invested £500,000 to date in developing a new type of insect…

A: Calculate the net present value as follows: a. Intrinsic value is £41,411.35 b. Change in NPV is…

Q: Delaware Chemicals is considering the installation of a computer process control system in one of…

A: Computation of the inflows and outflows of the project is shown: Formula sheet is shown as follows:

Q: Mike made $10,000 investment in an endorser whereby he manufactures products that are easily sold at…

A: We need to determine the accumulated cost and then by using the cost per unit, we need to determine…

Q: An assembly operation at a software company now requires $100,000 per year in labor costs. A robot…

A: Capitalized cost can be defined as the present value of all future cashflows of a capital investment…

Q: A piece of new equipment has been proposed by engineers to increase the productivity of a certain…

A: MARR = 20% Cash Flows: Year Cash Flow 1 -25000.00 2 8000.00 3 8000.00 4 8000.00 5…

Q: Delaware Chemicals is considering the installation of a computer process control system in one of…

A: Workings:

Q: below: The initial cost is $500,000. The tire cost is $20,000, and the estimate tire life is 4,000…

A: This is the expense of repairing and maintaining construction equipment that has been subjected to…

Q: Annual Ashley Foods, Inc. has determined that any one of five machines can be used in one phase of…

A: Calculation of PVAF for all machines Annual Operating Cost, $ per year: Machine PVAF (20%,4…

Q: Repairs for this machine will average 25,000 per year and operating expenses will be 30,000. if…

A: Equipment cost = P500000 Scrap value = P50000 Repair per year = P30000 Operating expenses includes…

Q: processing plant consumed 600,000 kwh of electric energy annually and pays an average of ₱2.00 per…

A: Annual cost for electriic energy = 6,00,000KWh (P2.00/kWh) = P1,200,000 Annual cost for power plant:…

Q: Natural Foods Inc. is planning to invest in new manufacturing equipment to make a new garden tool.…

A: Net cash flows indicate the forecast of cash inflows and outflows for a particular period.

Q: An equipment costing $57,500 is being considered for a production process at Dew Chemicals. The…

A: Calculation of rate of return from equipment Rate of return from equipment = (Total amount of…

Q: Santa Fe Company, a farm-equipment manufacturer, currently produces 20,000 units of gas filters for…

Q: Plato Pharmaceuticals Ltd has invested £500,000 to date in developing a new type of insect…

A: Sensitivity Analysis is analysis to show the change in one variable due to change in another…

Q: You are considering two types of machines fora manufacturing process.◼◼ Machine A has a first cost…

A: The estimation of the profitability of the alternatives to select the best alternative by computing…

Q: A process for producing the mosquito repellant Deet has an initial investment of $200,000 with…

A: a) Computation: Hence, the payback period at 0% interest rate is 5 years.

Q: Delaware Chemicals is considering the installation of a computer process control system in one of…

A: a) Computation of cash inflows over the life of the project: Hence, the cash inflows over the life…

Q: Higgins Machine Tools, Inc. is currently manufacturing one of its products on a hydraulic stamping…

A: a) Computation of revenue for the old machine per year: Cash flows of old machine:

Q: To maintain its newly acquired equipment, the company needs 40,000.00 per year for the first 5 years…

A: Annual cost for first 5 years = 40,000 Annual cost for next 5 years = 60,000 Additional cot at the…

Q: A machine, costing $30,000 to buy and $2.500 per year to operate. will save mainly labor expenses in…

A: a) The point at which NPV is zero gives annual savings. Computation:

Q: The process for producing a fruit-tree pesticide has a first cost of $200,000 with annual costs of…

A: PAYBACK PERIOD The payback period method is a technique used in capital budgeting for calculating…

Q: A new automotive "dry paint" separation process is environmentally friendly and is expected to save…

A: Payback period refers to the amount of time taken or required by an investment to recover its…

Q: A mixing process for laboratory-grade sodium phosphate has an estimated first cost of $320,000 with…

A: Given information: Amount to be invested $320,000 Estimated cost is $40,000 Estimated income is…

Q: The overhead costs in a highly automated factory are expected to increase at an annual compound rate…

A: Given information is: The overhead costs in a highly automated factory are expected to increase at…

Q: A mixing process for laboratory-grade sodium phosphate has an estimated first cost of $320,000 with…

A: Given that:

Q: A process for making a laboratory-grade sodium phosphate will have a first cost of $320,000 with…

A: The payback period is the number of years or months required to cover the initial cost of investment…

Q: A truck can be purchased for $55,000. Annual O&M costs are expected to increase by $1,800 every…

A: A) Replacement Interval Optimal (1) Equivalent estimated cost of a new machine- a)New machine cost =…

Q: Heyden Motion Solutions ordered $7 million worth of seamless tubes for manufacturing their high…

A: Given, r=15% annual cost = $860,000 initial investment = $7000,000 n=3 years

Q: A packing equipment that cost P 500,000 will last for 20 years and have a scrap value at that time…

A: Equipment cost = P500000 Scrap value = P50000 Repair per year = P30000 Operating expenses includes…

Q: A manufacturing plant manager has purchased a new bologna slicing machine for $24,500. The new…

A: Present value of annuity is the current value of the future payments that are calculated using the…

Q: The initial cost of a pulverized coal cyclone furnace is $800,000. If the operating cost is $90,000…

A: Given information: Initial cost is $800,000 Operating cost in year 1 is $90,000 Operating cost in…

Q: The cost for manufacturing a component used in intelligent interface converters was $23,000 the…

A: The question gives the following information:

Q: Your IT company is working on a four-month project for a local mining company. The total planned…

A: Earned value calculation is done in order to determine the performance of the project. It is used to…

Q: A health services firm is thinking about purchasing a large autoclave for $180,000. The autoclave is…

A: Annual worth distributes present worth into equivalent uniform value over its useful life.

Q: A company that manufactures brushless blowers invested $650,000 in an automated quality control…

A: IRR is the rate of return a project generates through its lifetime expressed in annual terms. It is…

Q: A process for producing the mosquito repellant Deet has an initial investment of $210,000 with…

A: Payback Period: The payback period method is a traditional capital budgeting method. It is used to…

Q: A piece of new equipment has been proposed by engineers to increase the productivity of a certain…

A: The present value of the cash flows means the discounted values of cash flows as if they happen to…

Q: quickly

A: Note: $121,000 that has been spent on marketing survey can be considered as a sunk cost & need…

Q: To make an item inhouse, equipment costing $250,000 must be purchased. It will have a life of 4…

A: Cost of equipments=$250000n=4 yearsAnnual cost=$80000Cost per unit to manufacture=$40Cost for buying…

Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

the process for producing a fruit-tree pesticide has a first cost of $200,000 with annual costs of $50,000 and revenue of $90,000 per year. What is the payback period in years?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Introduction

VIEW

Answer

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Gardner Denver Company is considering the purchase of a new piece of factory equipment that will cost $420,000 and will generate $95,000 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.
Suppose that a company is spending 60,000 per year for inspecting, 30,000 for purchasing, and 40,000 for reworking products. A good estimate of nonvalue-added costs would be a. 70,000. b. 130,000. c. 40,000. d. 90,000. e. 100,000.
A company is spending 70,000 per year for inspecting, 60,000 per year for purchasing, and 56,000 per year for reworking products. What is a good estimate of non-value-added costs? a. 126,000 b. 70,000 c. 56,000 d. 130,000
A restaurant is considering the purchase of new tables and chairs for their dining room with an initial investment cost of $515,000, and the restaurant expects an annual net cash flow of $103,000 per year. What is the payback period?
If a garden center is considering the purchase of a new tractor with an initial investment cost of $120,000, and the center expects a return of $30,000 in year one, $20,000 in years two and three. $15,000 In years four and five, and $10,000 in year six and beyond, what is the payback period?
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?
The process for producing a fruit-tree pesticide has a first cost of $200,000 with annual costs of $50,000 and revenue of $90,000 per year. What is the payback period at (a) i = 0%, and (b) i = 12% per year?
BIG Pharmaceuticals Ltd. has invested $330,000 to date in developing a new typeof insect repellent. The repellent is now ready for production and sale, and theMarketing Manager estimates that the product will sell 170,000 bottles in the firstyear, 210,000 bottles in the second years and 260,000 bottles a year over the nextthree years. The selling price of the insect repellent will be $6.00 a bottle andvariable costs are estimated to be $3.00 a bottle. Second- and third-year price willbe $6.99 a bottle with a variable cost of $3.50 a bottle, Fourth- and fifth yearselling price will be $7.95 with a variable cost of $3.75. Fixed costs (excludingamortization) are expected to be $210,000 a year. The figure is made up of$165,000 additional fixed costs and $45,000 fixed costs relating to the existingbusiness that will be apportioned to the new business. These costs will increaseby 5% each year.To produce the repellent, machinery and equipment costing $650,000 will have tobe purchased…
BIG Pharmaceuticals Ltd. has invested $330,000 to date in developing a new typeof insect repellent. The repellent is now ready for production and sale, and theMarketing Manager estimates that the product will sell 170,000 bottles in the firstyear, 210,000 bottles in the second years and 260,000 bottles a year over the nextthree years. The selling price of the insect repellent will be $6.00 a bottle andvariable costs are estimated to be $3.00 a bottle. Second- and third-year price willbe $6.99 a bottle with a variable cost of $3.50 a bottle, Fourth- and fifth yearselling price will be $7.95 with a variable cost of $3.75. Fixed costs (excludingamortization) are expected to be $210,000 a year. The figure is made up of$165,000 additional fixed costs and $45,000 fixed costs relating to the existingbusiness that will be apportioned to the new business. These costs will increaseby 5% each year.To produce the repellent, machinery and equipment costing $650,000 will have tobe purchased…
A mixing process for laboratory-grade sodium phosphate has an estimated first cost of $320,000 with annual costs of $40,000. Income is expected to be $98,000 per year. At a MARR of 20% per year, the payback period is closest to
A process for producing the mosquito repellant Deet has an initial investment of $200,000 with annual costs of $50,000. Income is expected to be $90,000 per year. (a) What is the payback period at i = 0% per year? A i = 12% per year? (Note: Round your answers to the nearest integer.) (b) What is the annual breakeven production quantity for both payback periods (determined above) if net profit, that is, income minus cost, is $10 per gallon?
Heyden Motion Solutions ordered $7 million worth of seamless tubes for manufacturing their high performance and precision linear motion products. If their annual operating costs are $860,000 per year, how much annual revenue is required over a 3-year planning period to recover the initial investment and operating costs at the company’s MARR of 15% per year?