Analyze a CSR capital investment proposal for Ganon Inc.Ganon Inc. is evaluating a proposal to replace its HID (high intensity discharge) lighting with LED (light emitting diode) lighting throughout its warehouse. LED lighting consumes less power and lasts longer than HID lighting for similar performance.The following information was developed:HID watt hour consumption per fixtureLED watt hour consumption per fixtureNumber of fixturesLifetime investment cost (in present value terms)to replace each HID fixture with LED500 watts per hr.300 watts per hr.800$30010300$0.12Operating hours per dayOperating days per yearMetered utility rate per kilowatt-hour (kWh)**Note: A kilowatt-hour is equal to 1,000 watts per hour.a. Determine the investment cost for replacing the 800 fixtures.240,000 ✓c. Should the proposal be accepted?Yesb. Determine the annual utility cost savings from employing the new energy solution.$ 57,600 ✓Evaluate the proposal using net present value, assuming a 15-year life and 8% minimum rate of return. (Click here to view Present Value of Ordinary Annuity.)$-253,021 X

Making decisions about capital budgeting entails assessing and choosing capital expenditures or…

Answered: Ganon Inc. is evaluating a proposal to…

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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The XYZ Manufacturing Company is evaluating options for spending on product quality and wants to find the optimal amount to spend on changing its processes to further prevent defects. Its engineers have developed the following estimates: 1. Defects The current defect rate is 10%. If it invests an additional $10 per unit in prevention costs, the defect rate will drop to 6%; spending $20 per unit on prevention drops the defect rate to 3%; spending $30 per unit drops the defect rate to 1.5%; and investing $40 per unit on prevention reduces the defect rate to 1%. 2. Inspection Inspection costs are $5 per unit. Inspection is successful at detecting 98% of defective units; the remaining 2% of defective products are sold and eventually returned for warranty repairs or replacement at no cost to the customer. 3. Internal failure costs are $400 per defective unit that is detected. 4. External failure costs are $1000 per unit returned. 5. Current production level is 1 million units. REQUIRED: A.…
please no excel!! please show all work and calculations thank you
Godo
Consider a drill press containing three drill bits. The current policy (called individual replacement) is to replace a drill bit when it fails. The firm is considering changing to a block replacement policy in which all three drillbits are replaced whenever a single drill bit fails. Each time the drill press is shut down, the cost is $100. A drill bit costs $50, and the variable cost of replacing a drill bit is $10. Assume that the time to replace a drill bit isnegligible. Also, assume that the time until failure for a drill bit follows an exponential distribution with a mean of 100 hours. This can be modeled in @RISK with the formula 5RISKEXPON (100). (Note: If you have the academic version of @RISK, this problem will require more RISKEXPON functions than the 100 allowed, but there is an easy workaround. An exponentially distributed random variable can be generated with Excel functions only using the formula =-Mean*LN(RAND()). Then @RISK can still be used to run the simulation.)…
FAE Technologies is deciding whether it should begin production of a new toy robot. It has manufactured children’s toys before but nothing as advanced as its latest robot so historical data is at a minimum. The company believes that they can secure the materials for manufacture for between $65-85 per unit and labor costs would be between $15-25 per unit. Management’s expectations are that materials will cost $70 per unit and labor $25 per unit and that 800 units will be sold monthly. Should FAE decide to manufacture the robots in-house, maintenance of the factory machine would cost $15,000 per month. However, management has found that another alternative is for the company to outsource the labor for a flat rate of $35 per unit. The company expects to sell between 750-1000 units per month initially at a price of $149. Provide recommendations for FAE technologies that will maximize profit. Also include base, worst, and best case scenario calculations and provide a scenario summary. Be…
Caspian Sea Drinks is considering the purchase of a plum juicer – the PJX5. There is no planned increase in production. The PJX5 will reduce costs by squeezing more juice from each plum and doing so in a more efficient manner. Mr. Bensen gave Derek the following information. What is the IRR of the PJX5? a. The PJX5 will cost $1.90 million fully installed and has a 10 year life. It will be depreciated to a book value of $158,307.00 and sold for that amount in year 10. b. The Engineering Department spent $11,647.00 researching the various juicers. c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $22,370.00. d. The PJX5 will reduce operating costs by $440,567.00 per year. e. CSD’s marginal tax rate is 31.00%. f. CSD is 72.00% equity-financed. g. CSD’s 19.00-year, semi-annual pay, 6.57% coupon bond sells for $1,000.00. h. CSD’s stock currently has a market value of $24.80 and Mr. Bensen believes the market estimates that dividends will grow at…
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Woodruff Company is currently producing a snowmobile that uses five specialized parts. Engineering has proposed replacing these specialized parts with commodity parts, which will cost less and can be purchased in larger order quantities. Current activity capacity and demand (with specialized parts required) and expected activity demand (with only commodity parts required) are provided. Activities Activity Driver ActivityCapacity Current ActivityDemand Expected ActivityDemand Material usage Number of parts 200,000 200,000 200,000 Installing parts Direct labor hours 20,000 20,000 16,000 Purchasing parts Number of orders 7,600 6,498 3,990 Additionally, the following activity cost data are provided: Material usage: $11 per specialized part used; $27 per commodity part; no fixed activity cost. Installing parts: $21 per direct labor hour; no fixed activity cost. Purchasing parts: Four salaried clerks, each earning a $47,000 annual salary; each clerk is capable of processing 1,900…

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