An electric switch manufacturing company is trying todecide between three different assembly methods. MethodA has an estimated first cost of $46,000, an annualoperating cost (AOC) of $7,000, and a service life of 2 years.Method B will cost $86,000 to buy and will have an AOC of$3,500 over its 4-year service life. Method C costs $115,000initially with an AOC of $6,000 over its 8-year life. MethodsA and B will have no salvage value, but Method C will haveequipment worth 12% of its first cost.Perform a future worth analysis to select the method at /= 10% per year.The future worth of method A is $The future worth of method B is $The future worth of method C is $Method: (Click to select) is selected.(Click to selectCCBAA

For Method A: Equivalent Annual Worth =Service Life /Future Worth Equivalent Annual Worth =…

Answered: An electric switch manufacturing…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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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. a. Calculate the payback period for this project. Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. Calculate the NPV for this project. Note: Do not round intermediate calculations and round your answer to 2 decimal…
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You are evaluating two different silicon wafer milling machines. The Techron I costs $216,000, has a three - year life, and has pretax operating costs of $55, 000 per year. The Techron II costs $380,000, has a five-year life, and has pretax operating costs of $28, 000 per year. For both milling machines, use straight - line depreciation to zero over the project's life and assume a salvage value of $32, 000. If your tax rate is 23 percent and your discount rate is 10 percent, compute the EAC for both machines. Note: Your answer should be a negative value and indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.
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