MyLab Finance with Pearson eText -- Access Card -- for Principles of Managerial Finance
MyLab Finance with Pearson eText -- Access Card -- for Principles of Managerial Finance
15th Edition
ISBN: 9780134479903
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
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Chapter 1, Problem 1.4P

Marginal cost-benefit analysis and the goal of the firm Ken Allen, capital budgeting analyst for Bally Gears, Inc., has been asked to evaluate a proposal. The manager of the automotive division believes that replacing the robotics used on the heavy truck gear line will produce total benefits of $560,000 (in today’s dollars) over the next 5 years. The existing robotics would produce benefits of $400,000 (also in today’s dollars) over that same period. An initial cash investment of $220,000 would be required to install the new equipment. The manager estimates that the existing robotics can be sold for $70,000. Show how Ken will apply marginal cost-benefit analysis techniques to determine the following:

  1. a. The marginal benefits of the proposed new robotics.
  2. b. The marginal costs of the proposed new robotics.
  3. c. The net benefit of the proposed new robotics.
  4. d. What should Ken recommend that the company do? Why?
  5. e. What factors besides the costs and benefits should be considered before the final decision is made?
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Marginal cost-benefit analysis and the goal of the firm Ken Allen, capital budgeting analyst for Bally Gears, Inc., has been asked to evaluate a proposal. The manager of the automotive division believes that replacing the robotics used on the heavy truck gear line will produce total benefits of $566,000 (in today's dollars) over the next 5 years. The existing robotics would produce benefits of $357,000 (also in today's dollars) over that same time period. An initial cash investment of $226,400 would be required to install the new equipment. The manager estimates that the existing robotics be sold for $56,000. Show how Ken will apply marginal cost-benefit analysis techniques to determine the following: a. The marginal benefits of the proposed new robotics. b. The marginal cost of the proposed new robotics. c. The net benefit of the proposed new robotics. d. What should Ken recommend that the company do? Why? e. What factors besides the costs and benefits should be considered before the…
Marginal​ cost-benefit analysis and the goal of the firm Ken​ Allen, capital budgeting analyst for Bally​ Gears, Inc., has been asked to evaluate a proposal. The manager of the automotive division believes that replacing the robotics used on the heavy truck gear line will produce total benefits of $584,000 (in today's​ dollars) over the next 5 years. The existing robotics would produce benefits of $398,000 (also in​ today's dollars) over that same time period. An initial cash investment of $233,600 would be required to install the new equipment. The manager estimates that the existing robotics can be sold for $62,000. Show how Ken will apply marginal​ cost-benefit analysis techniques to determine the​ following:   a. The marginal (added) benefits of the proposed new robotics is.......? b. The marginal (added) cost of the proposed new robotics is...........? c. The net benefit of the proposed new robotics is........?   d. Ken Allen should recommend the company............?  ​(Select the…
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MyLab Finance with Pearson eText -- Access Card -- for Principles of Managerial Finance

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