Net Present Value and Competing Alternatives
Stillwater Designs has been rebuilding Model 100, Model 120, and Model 150 Kicker sub-woofers that were returned for warranty action. Customers returning the subwoofers receive a new replacement. The warrant)' returns are then rebuilt and resold (as seconds). Tent sales are often used to sell the rebuilt speakers. As part of the rebuilding process, the speakers are demagnetized so that metal pieces and shavings can be removed. A demagnetizing (demag) machine is used to achieve this objective. A product design change has made the most recent Model 150 speakers too tall for the demag machine. They no longer fit in the demag machine.
Stillwater Designs is currently considering two alternatives. First, a new demag machine can be bought that has a different design, eliminating the fit problem. The cost of this machine is $600,000, and it will last 5 years. Second, Stillwater can keep the current machine and sell the 150 speakers for scrap, using the old demag machine for the Model 100 and 120 speakers only. A rebuilt speaker sells for $295 and costs $274.65 to rebuild (for materials, labor, and overhead cash outlays). The $274.65 outlay includes the annual operating cash effects of the new demag machine. If not rebuilt, the Model 150 speakers can be sold for $4 each as scrap. There are 10,000 Model 150 warranty returns per year. Assume that the required rate of return is 10%.
Required:
Intermediate Accounting: Reporting And Analysis
Corporate Financial Accounting
Financial & Managerial Accounting
Financial Accounting
College Accounting, Chapters 1-27
Financial And Managerial Accounting
Accounting Information Systems
Management, Loose-Leaf Version
Brief Principles of Macroeconomics (MindTap Course List)
Fundamentals of Financial Management (MindTap Course List)
Essentials of Business Communication (MindTap Course List)
ECON: MICRO4 (New, Engaging Titles from 4LTR Press)
STATISTICS F/BUSINESS+ECONOMICS-TEXT
MKTG 12:STUDENT ED.-TEXT
Principles of Microeconomics (MindTap Course List)
Essentials of Economics (MindTap Course List)
Principles of Macroeconomics (MindTap Course List)
Contemporary Marketing
Principles of Economics (MindTap Course List)
Fundamentals of Financial Management, Concise Edition (MindTap Course List)
Foundations of Business (MindTap Course List)
Accounting Information Systems
Accounting (Text Only)
Financial & Managerial Accounting
Financial Accounting
College Accounting (Book Only): A Career Approach
Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)
Exploring Economics
Statistics for Business & Economics, Revised (MindTap Course List)
College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)
College Accounting (Book Only): A Career Approach
Principles of Macroeconomics (MindTap Course List)
Fundamentals of Financial Management (MindTap Course List)
Pkg Acc Infor Systems MS VISIO CD
PAYROLL ACCT.,2019 ED.(LL)-TEXT
Corporate Financial Accounting
Survey of Accounting (Accounting I)
Macroeconomics
Microeconomics
Economics (MindTap Course List)
Cornerstones of Cost Management (Cornerstones Series)
Economics For Today
Practical Management Science
Purchasing and Supply Chain Management
Managerial Accounting
Cornerstones of Financial Accounting
Economics: Private and Public Choice (MindTap Course List)
Principles of Microeconomics
MACROECONOMICS FOR TODAY
Micro Economics For Today
Macroeconomics: Private and Public Choice (MindTap Course List)
Understanding Management (MindTap Course List)
Microeconomics: Private and Public Choice (MindTap Course List)