Concept explainers
a)
To modify: The capital budgeting model if most of two projects 3, 5, and 6 can be selected.
Introduction: The variation between the present value of the
b)
To modify: The capital budgeting model if investment 5 and 1 is selected.
Introduction: The variation between the present value of the cash outflows and the present value of the cash inflows are known as the Net Present Value (NPV).
c)
To modify: The capital budgeting model if one of investments 1 and 2 are selected.
Introduction: The variation between the present value of the cash outflows and the present value of the cash inflows are known as the Net Present Value (NPV).
d)
To modify: The capital budgeting model if investment 5, 3,and 4 are selected.
Introduction: The variation between the present value of the cash outflows and the present value of the cash inflows are known as the Net Present Value (NPV).
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Chapter 6 Solutions
Practical Management Science
- 9.5 Capital Healthplans Inc. is evaluating two different methods for providing home health services to its members. Both methods involve contracting out for services, and the health outcomes and revenues are not affected by the method chosen. Therefore, the net cash flows for the decision are all outflows. Here are the projected flows: Year Method A ($) Method B ($) 0 (300,000) (120,000) 1 (66,000) (96,000) 2 (66,000) (96,000) 3 (66,000) (96,000) 4 (66,000) (96,000) 5 (66,000) (96,000) What is each alternative’s IRR? If the opportunity cost of capital for both methods is 9 percent, which method should be chosen? Why?arrow_forward2. A firm makes two products, Y and Z. Each unit of Y costs $10 and sells for $40. Each unit of Z costs $5 and sells for $25. If the firm's goal is to maximize profit, what would be the appropriate objective function? Select one: a. Maximize profit Z = $10Y + $25Z b. Maximize profit Z = 0.25Y + 0.20Z c. Maximize profit Z = $40Y + $25Z d. Maximize profit Z = $50(Y + Z) e. Maximize profit Z = $30Y + $20Zarrow_forwardA young engineer is considering establishing his own small company.An investment of Php 100,000 will be required which must be recovered in 15years . It is estimated that sales will be Php 150,000 per year and thatoperating expenses will be as follows:Material Php 40,000 per yearLabor Php 70,000 per yearOverhead Php 10,000 + 10% of sales/yearSelling expenses Php 5,000/yearThe young engineer will give up his regular job paying Php 150,000 per yearand devote full time to the operation of the business. This will result indecreasing labor by Php 10,000 per year , material cost by Php 7000 peryear, and overhead cost by Php 8000 per year. If the young engineer expectsto earn at least 20% on his capital, should he invest ?arrow_forward
- 1.A clockmaker makes two types of woodenclocksto sell at various malls. It takes him three hours to assemble a pine clock, which requires two oz of varnish. It takes four hours to assemblea molave clock, which takes four oz of varnish. He has eight oz of varnish available in stock and can work 12 hours. If he makes a P100 profit on each pine clock and P120 on each molave clock, how many of each type should he make to maximize his profit?2.A biologist is developing two new strains of bacteria. Each sample of Type A bacteria produces five new viable bacteria,and each Type B bacteria produces six new viable bacteria. Altogether, at least 150 new viable bacteria must be produced. At least 10, but not more than 20,of the original sample,must be Type A,and not more than 60 of the samples must be Type B. A sample of Type A costs P500,and a sample of Type B costs P700. If both types are to be used, how many samples of each type should be used to minimize the cost?arrow_forwardGrey Manufacturing Company expects sales to total 13,000 units in the first quarter, 12,000 units inthe second quarter, and 15,000 units in the third quarter of the current fiscal year. Company policyis to have on hand at the end of each quarter an amount of inventory equal to 10% of the followingquarter’s sales. Given this information, how many units should be scheduled for production in thesecond quarter?arrow_forwardHow much influence can the employee requirements for one, two, or three days have on the weekly schedule in the employee scheduling example? Explore this in the following questions: a. Let Monday’s requirements change from 17 to 25 in increments of 1. UseSolverTable to see how the total number of employees changes.b. Suppose the Monday and Tuesday requirements can each, independently of one another, increase from 1 to 8 in increments of 1. Use a two-way SolverTable to see how the total number of -employees changes.c. Suppose the Monday, Tuesday, and Wednesday -requirements each increase by the same amount, where this increase can be from 1 to 8 in -increments of 1. Use a one-way SolverTable to -investigate how the total number of employees changes.arrow_forward
- Can anyone solve this problem? 1.Draw a network to represent the sequence ofstages involved in the preparation of budgets.2. Can the whole process be completed withinthe required period of 17 weeks?3. If it is necessary to reduce the time taken tocomplete the budgeting process, which stagesshould be investigated and why?4. Explain the difference between total float, freefloat and independent float. Show that stage 1has a free float of 3 weeks, of which 2 weeksare independent float.arrow_forward2. A firm makes two products X and Y and has a total production capacity of 9 tons per day.X and Y requiring the same production capacity. The same has a permanent contract to supply at least two tons of X and at least 3 tons of Y per day to another company. Each ton of X requires 20 machine hours of production time and each ton of Y requires 50 machine hours of production time. The daily maximum possible number of machine hours is 360. The entire firm's output can be sold and profit made is 80 R.O of X and 120 R.O per ton of Y. It is required to determine the production schedule for maximum profit and to calculate this profit. Formulate a LPP.arrow_forwardYou own wheat warehouse with capacity of 20,000 bushels. At the beginning of month 1, you have 6,000 bushels of wheat. Each month, wheat can be bought and sold at the price per 1000 bushels given in the table Month Selling price ($) Purchase prie ($) 1 3 8 2 6 8 3 7 2 4 1 3 5 4 4 6 5 3 7 5 3 8 1 2 9 3 5 10 2 5 The sequence of events during each month is as follows: a. You observe your initial stock of wheat. b. You can sell any amount of wheat up to your initial stock at the current month's selling price. c. You can buy(at the current month's buying price) as much wheat as you want, subject to the warehouse size imitation. Your goal is to formulate an LP that can be used to determine how to maximise the profit earned over the next 10 months and solve using Excel solver or AMPLarrow_forward
- You have recently won the super jackpot in the WashingtonState Lottery. On reading the fine print, you discover that you have the following twooptions:a. You will receive 31 annual payments of $250,000, with the first payment beingdelivered today. The income will be taxed at a rate of 28 percent. Taxes will bewithheld when the checks are issued.b. You will receive $530,000 now, and you will not have to pay taxes on this amount.In addition, beginning one year from today, you will receive $200,000 each yearfor 30 years. The cash flows from this annuity will be taxed at 28 percent.Using a discount rate of 7 percent, which option should you select?arrow_forwardThe topic is about Quantitive analysis and decision making. Problem: A firm just completed a new plant that will producemore than 500 different products, using morethan 50 different production lines and machines.The production scheduling decisions are criticalin that sales will be lost if customer demands arenot meet on time. If no individual in the firmhas experience with this production operationand if new production schedule must begenerated each week, why should the firmconsider a quantitative approach to theproduction scheduling problem?arrow_forward7. A and B are started working for a company in similar jobs on January 1, 2020. A’s initial monthly salary was OMR 500, which increases by OMR 50 after every year. B's initial monthly salary was OMR 600, which increases by OMR 10 after every six months. If these arrangements continue till December 31, 2030. Find the total salary they will receive during that period.arrow_forward
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