A large company is considering changing all the light bulbs in their office buildings to new, more efficient bulbs. The accountant said the return on the investment is equal to the annual energy savings divided by the net installation cost. They received two bids. For the first bid, the annual cnergy savings is modelled by 14x and the net installation cost by 3x-1 where x represents the number of light bulbs in the hundreds. The company estimates that 2500 bulbs would need to be replaced. For the second bid the savings was modelled by 10x and thec cost by 2r +1 for the same representation of x and for at least 2500 bulbs. a) Write an expression to model the return on investment for the first bid. b) Write an expression to model the return on investment for the second bid. ) At what number of bulbs would the return on investment be the same for both bids? ) Which bid is the better bid to take? Explain why.

A large company is considering changing all the light bulbs in their office buildings to new, more efficient bulbs. The accountant said the return on the investment is equal to the annual energy savings divided by the net installation cost. They received two bids. For the first bid, the annual cnergy savings is modelled by 14x and the net installation cost by 3x-1 where x represents the number of light bulbs in the hundreds. The company estimates that 2500 bulbs would need to be replaced. For the second bid the savings was modelled by 10x and thec cost by 2r +1 for the same representation of x and for at least 2500 bulbs. a) Write an expression to model the return on investment for the first bid. b) Write an expression to model the return on investment for the second bid. ) At what number of bulbs would the return on investment be the same for both bids? ) Which bid is the better bid to take? Explain why.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Oahu Inc. is considering an investment in new equipment that will be used to manufacture a smartphone. The phone is expected to generate additional annual sales of 5,100 units at $276 per unit. The equipment has a cost of $521,700, residual value of $39,300, and an 8-year life. The equipment can only be used to manufacture the phone. The cost to manufacture the phone follows: Line Item Description Amount Cost per unit: Direct labor $47.00 Direct materials 182.00 Factory overhead (including depreciation) 31.60 Total cost per unit $260.60 Determine the average rate of return on the equipment. If required, round to the nearest whole percent.
Oregon Equipment Company wants to develop a new log-splitting machine for rural homeowners. Market research has determined that the company could sell 6,000 log-splitting machines per year at a retail price of $700 each. An independent catalog company would handle sales for an annual fee of $2,000 plus $50 per unit sold. The cost of the raw materials required to produce the log-splitting machines amounts to $80 per unit. If company management desires a return equal to 10 percent of the final selling price, what is the target conversion and administrative cost per unit? Round answer to the nearest cent.
wallace inc is considering spending $100,000 for a new grinding machine. this amount could be invested to yield a 12% return. what is the opportunity cost?
Your company is deciding whether to purchase a high-quality printer for your office or one of lesser quality. The high-quality printer costs $45 000 and should last five years. The lesser quality printer costs $25 000 and should last two years. If the cost of capital for the company is 12 per cent, then what is the equivalent annual cost for the best choice for the company?
ZipCar auto parts store has $88,000 to invest in a project to detect and reduce insier theft in their stores. They have considering investing in one of two alternatives, identified as Y and Z. Z is the higher first-cost alternative, and the incremental initial investment between the two is $22,000 and will exhibit a rate of return of 12% per year. Z requires an investment of $88,000. They expect a rate of return on the $88,000 investment of 49 percent. Answer the following questions; (a) what is the size of the investment required in Y?, and, (b) what is the rate of return on Y? The size of the investment required in Y is $ The rate of return on Y is %.
The Chief Operations Officer (COO) of a manufacturing firm recommends one of the manufacturing sites to undergo a process improvement initiative. He claims that this project will enable the company to realize a net savings of at least $3.25 Mln. The Chief Financial Officer (CFO) of the company tasked you to conduct a financial analysis to verify the claims of the COO. After performing cost analysis, you estimated that the project will require an initial investment of $2 Mln today and $1 Mln in Year 1. Afterwards, the initiative will yield an annual cost savings of $850k from Year 2 to Year 10. You assume that these cost savings are realized at the end of each year. (a) Suppose that you use a discount rate of 5%. Will the resulting net savings support the claim of the COO? (b) Determine the Internal Rate of Return (IRR) of the process improvement initiative. (c) Show the NPV profile of the project.
Kindly help me solve this problem using Excel. Have to calculate the payback period for the project, calculate the NPV for the project and calculate the IRR for the project.
Abhaliya
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,164.00 to install, $5,072.00 to operate per year for 7 years at which time it will be sold for $7,041.00. The second, RayCool 8, costs $41,329.00 to install, $2,088.00 to operate per year for 5 years at which time it will be sold for $9,047.00. The firm's cost of capital is 6.68 %. What is the equivalent annual cost of the AC360? Assume that there are no taxes. Submit Answer format: Currency: Round to: 2 decimal places.
A manufacturer of automated optical inspection devices is deciding on a project to increase the productivity of the manufacturing processes. The estimated costs for the two feasible alternatives being compared are shown below. Use the internal rate of return (IRR) method to determine which alternative should be selected if the analysis period is 8 years and the company's MARR is 4% per year. Alternative M N Initial costs $30,000 $45,000 Net annual cash flow $4,500 $7,000 Life in years 8 8 (a) IRR of base alternative = (b) IRR of incremental cash flow = (c) Choose Alternative
You are considering buying a machine to produce widgets (again!). It takes you one year to finetune the machine so that it produces exactly the kind of widgets you want. The machine costs $40,000 today and produces 100,000 widgets in year 2. (You cannot produce in year 1 because you have to fine-tune the machine first.) Expected revenues are $1 per widget. The cost of producing widgets depends on the type of gas the machine uses. The machine uses one unit of gas per widget produced. In its current version the machine runs on a gas called "Gas A". The price of "Gas A" in year 2 is uncertain and will be known only at the beginning of year 2. This price will be either $0.75 or $0.25 per unit of gas with equal probability. All revenues and costs (except the cost of the machine) accrue at the end of year 2. The discount rate is 10%. a) What is the NPV of the project? b) The manufacturer of the machine offers you a device that can be attached to the machine. You will have to buy the device…
Pappy’s Potato has come up with a new product, the Potato Pet (they are freeze-dried to last longer). Pappy’s paid $180,000 for a marketing survey to determine the viability of the product. It is felt that Potato Pet will generate sales of $895,000 per year. The fixed costs associated with this will be $228,000 per year, and variable costs will amount to 24 percent of sales. The equipment necessary for production of the Potato Pet will cost $970,000 and will be depreciated in a straight-line manner for the four years of the product life (as with all fads, it is felt the sales will end quickly). This is the only initial cost for the production. Pappy's has a tax rate of 22 percent and a required return of 16 percent. Calculate the Time 0 cash flow for this project. Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32. Calculate the annual OCF for this project. Note: Do not round…