Gethsemane Products Inc. is the leading manufacturer of cooking oil in the market. To cater to theincreasing demand, the executives have decided to invest in a better machinery that could increaseproduction output per machine hour. The engineers working for the plant gathered the following data forthe managers to consider and to choose from. The options below have the same acceptable productionoutput rate. The company's MARR is at 8%.SupplierСуprusEngineeringWorks Inc.P10,650,000DamascusAlphaMachineriesСо.Bros.CapitalInvestmentAnnualP11,000,000P11,800,000P8,000,000P9,100,000P9,100,000RevenueAnnualP6,100,000P5,750,000P5,590,000Expenses(excludingdepreciation)Useful Life6 yearsSalvage Value P900,0006 уearsP400,0005 yearsP890,000a. If the repeatability assumption is applied, which among the options above should bechosen using the present worth method?b. Construct an ATCF table for the chosen machinery from (a). Use the straight-linemethod of depreciation and a 38% tax rate

Repeatability Assumption is made while comparing alternatives with different useful lives . What we…

Answered: Gethsemane Products Inc. is the leading…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The town council of Cato Springs is considering two alternative investments to upgrade and expand its spring-fed recreational area. The two investment alternatives (A and B) have different costs and will produce different public benefits. The projected costs and benefits over a 10-year planning horizon for the two alternatives are given below. Using a MARR of 7.0%, which, if either, of the alternatives should be pursued by the Cato Springs city council? CF (Benefits for Alt A) CF (Benefits for Alt EOY CF (Costs for Alt A) CF (Costs for Alt B) B) $7,590,000 $10,310,000 1 $2,240,000 $1,400,000 $3,360,000 $2,200,000 $400,000 $2,596,000 $600,000 $3,755,000 $600,000 $3,003,600 $800,000 $4,056,600 4 $800,000 $3,446,100 $1,000,000 $4,377,300 5 $1,000,000 $3,651,400 $1,200,000 $4,624,800 $1,200,000 $3,876,600 $1,400,000 $4,949,800 7 $1,400,000 $4,135,700 $1,600,000 $5,365,600 8 $1,600,000 $4,506,400 $1,800,000 $5,649,600 9 $1,800,000 $5,458,900 $2,000,000 $6,252,300 10 $2,000,000 $6,987,400…
Super Tennis Co is in the business of designing and manufacturing running shoes for long distance runners. They are considering a $500 million upgrade to their production line for the iPhone/iPad/ iWatch connected shoe that has Bluetooth connectivity. The potential cash flow is estimated at net revenues of $460 million per year for four years. Recently, they were advised of potential patent infringement and to eliminate this problem they are considering buying a license. YezzCo will sell a license that is good for four years of exclusive use of the patent and associated intellectual property. Super Tennis Co uses a corporate MARR of 14% and their risk-free alternatives are 6%. The VP of Engineering at Super Tennis Co estimates market volatility in demand is 40%. The VP of Marketing estimates market volatility in demand at 35%. 1.Since the VPAc€?cs trust you, they asked you to figure out the most they should pay for a license from YezzCo. 2. Super Tennis Co is known to be liberal in…
SITUATION 3: A machine used for cutting materials in a factory has the following outputs per hour at various seeds and required periodic tool regrinding at the intervals cited. Seed Outputs per hour Tool regrinding A 200 pieces Every 8 hours B 280 pieces Every 5 hours A set of tools cost P12,600 and can be ground twenty times. Each regrinding costs P540.00 and the time needed to regrind and change tools is 1 hour. The machine operator is paid P350.00 per hour including the time the tool is changed. The tool grinder who also sets the tools to the machine is paid P400.00 per hour. The hourly rate chargeable against the machine is P380.00 regardless of machine seed. Which seed is the most economical?
Hint: You need to do the following three things; 1) PWC Old & PWC New 2) Incremental NPV 3) Incremental ROR
Two investment projects are being evaluated based on their payback periods. The first alternative requires an initial investment of $520,000, has gross revenues of $85,000, annual O&M costs of $17,000 and a service life of 23 years. What is the project's discounted payback period if the MARR is 10% per year? OA. 8.8 years OB. 19.1 years OC. 15.2 years OD. 9.9 years If the second alternative has a payback period of 20 years, which alternative should be preferred based on the payback period? OA. The second alternative OB. The first alternative
11-8. The Ford Motor Company is considering three mutually exclusive electronic stability control systems for protection against rollover of its automobiles. The investment (study) period is four years, and MARR is 12% per year. Data for the fixture costs of the systems are as follows. Alternatives В Annual savings MV (after 4 years) Capital investment $12,000 $15,800 $8,000 $4,000 $5,200 $3,000 $3,500 $1,500 $3,000 IRR 19.2% 18% 23% Plot the AW of each alternative against MARR as the MARR varies across this range: 4%, 8%, 12%, 16%, and 20%. What can you generalize about the range of the MARR for which each alternative is preferred? (11.2)
Answer part A Answer part B
Vermonto Ltd is putting together a tender for a one-off contract using relevant costing principles. The job requires 50m2 of Material X Vermonto has established the following information regarding material X: Material X Amount held 40m2 Original cost £25 per m2 Net realisable value £28 per m2 Current purchase price £30 per m2 Material X is no longer used by Vermonto for its ongoing operations and any existing inventories will be sold if not used. What is the relevant cost for material X for the purpose of pricing the contract?
Consider the cashflow (n = 10 years, MARR = e = 14%) Cash Flow A Investment P 180,000 Revenues P 350,000 per year Expenses P 400,000 per year for the first 3 years, decreasing by P 50,000 per year thereafter a. Determine the Annual Worth (AW) of each project. b. Determine the Internal Rate of Return (IRR) of each project. c. Determine the External Rate of Return (ERR) of each project. Salvage Value P 40,000
am. 117.
AMH Inc. currently sells 1,148 Class A motor homes, 2,751 Class C motor homes, and 108,438 pop- up trailers yearly. AMH is considering adding a mid-range camper and expects to sell 1,783 if launched. However, if the new camper is added, AMH expects that its Class A sales will decline to 656 units while the Class C campers will decline to 1,750. The sales of pop-ups will not be affected. Class A motor homes sell each for an average of $115,324. Class C homes are priced at $27,383, and the pop-ups sell each for $4,678. The new mid-range camper will sell for $46,299. What is the cost of erosion? Round your response to the dollar, and input without the $ sign.

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