Titan manufactures and sells gas-powered electricity generators. It canpurchase a new line of fuel injectors from either of two companies: A orB. The AOC and annual savings estimates are available, but the savingsestimate is unreliable at this time. Use an AW analysis at MARR = 10%per year to determine if the selection between A and B changes whenthe estimated savings varies as much as ±40% from the best estimates,and if so, at what percentage in the estimate? Use tabulated factors.ABCompanyFirst cost, $-54,000-47,500AOC, $ per year-7,500-8,000Savings best estimate, $ per year15,00013,000Salvage value, $5,0003,700Life, years5(Click to select)the selection between A and B (Click to select)9when the estimated savings is (Click to select)V

AW analysis we calculate the annual equivalent cost of all cost that is equivalent to all cost and…

Answered: manufactures and sells gas-powered…

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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Net Present Value Use Exhibit 12B.1 and Exhibit 12B.2 to locate the present value of an annuity of $1, which is the amount to be multiplied times the future annual cash flow amount. Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows. a. Campbell Manufacturing is considering the purchase of a new welding system. The cash benefits will be $480,000 per year. The system costs $1,450,000 and will last 10 years. b. Evee Cardenas is interested in investing in a women's specialty shop. The cost of the investment is $180,000. She estimates that the return from owning her own shop will be $45,000 per year. She estimates that the shop will have a useful life of 6 years. c. Barker Company calculated the NPV of a project and found it to be $63,900. The project's life was estimated to be 8 years. The required rate of return used for the NPV calculation was 10%. The project was expected to produce annual after-tax cash flows of $135,000. Required: 1.…
Coore Manufacturing has the following two possible projects. The required return is 10 percent. Project Y -$ 27,900 13,900 Project Z -$ 59,000 17,500 12,300 30,000 14,700 10,300 Year 0 1 2 3 4 15,500 28,000 a. What is the profitability index for each project? Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 3- b. What is the NPV for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 3. c. Which, if either, of the projects should the company accept? a. Project Y Project Z b. Project Y Project Z c. Accept project
For the following two alternatives, if the MARR is 10% per year (a)which one has a shorter payback period (b) which one do you select if you use the PW analysis. (c) is your selection different in (a) and (b)? Why? (d) use Spreadsheet to solve a and b. Alternative A: initial cost = $300,000 Revenue = $60,000 Alternative B: initial costs = $300,000 Revenue starts from n=1 at $10,000 and increases by $15,000 per year The expected life is 10 years for each alternative.
Hazlett & Family is organized into two geographic markets Northern and Southern. The company makes an off-road vehicle for recreation and agricultural use. The vehicle is sold in three models, depending on the power and options. The three models, from least expensive to most expensive, are the H-L, H-LX, and H-LXS. The company's financial staff has prepared the following forecasted income statement for the upcoming fiscal year (in thousands of dollars): Sales revenue Cost of goods sold Gross margin Marketing costs Administrative costs Total marketing and administrative Operating profits Total $ 59,400 46,050 $ 13,350 H-L H-LX H-LXS 4,875 2,421 $ 7,296 $ 6,054 Management has expressed special concern with the Southern market because of the extremely poor return on sales. This market was entered a year ago because it seemed like the best opportunity for growth. Hazlett & Family knew that it would take some time to build profitability in the market, but there has been no noticeable change…
Data Using Incremental with EUAW analysis find the best alternative, MARR = %10. You should use Excel and show your equations separately, see below example: [A Benefit - [IC (A/P, i%, n) - Salvage (A/F, i, n)] + A Cost+ G Cost (A/G, i, n)] First Cost Salvage Value Annual Benefit M&O M&O Gradient Useful Life, Years A $2,300,000 $85,000 $580,000 $65,000 $10,000 10 B $2,750,000 $125,000 $670,000 $78,000 $15,000 10 с $2,550,000 $95,000 $650,000 $72,000 $12,500 10
WCT Holdings Bhd, is considering two mutually exclusive alternatives A & B for implementing an automated passenger check-in counter at its hub airport. Each alternative meets the same service requirements, but differences in capital investment amounts, benefit, useful life, and cost expenditures. Compare which alternative which prefer using multiple attribute individual analysis present worth PW, if company use an interest rate of 0.75%? Include the cash flow diagram in your calculation: Alternative A has useful life of 6 years, a capital investment is RM45,000.00 with estimated an annual benefit of RM3,500.00 per year and estimated for an annual operating & maintenance cost of RM750.00 per year. The alternative received one-off benefit saving of RM 1,500.00 in third year. The salvage value of RM10,700.00 at the end of year life. Alternative B has useful life of 12 years, a capital investment is RM50, 000.00 with estimated an annual benefit of RM5,200.00 per year and estimated…
Generro Company is considering the purchase of equipment that would cost$60,000and offer annual cash inflows of$16,300over its useful life of 5 years. Assuming a desired rate of return of10%, is the project acceptable? (PV of \$1 and PVA of \$1) (Use appropriate factor(s) from the tables provided.) Mitiple Choice The answer cannot be detergined. No, since the negative net present value indicates the investmeot will yield a fate of retum below the desred tate of return. Yes, since the investment will generate$81.500in future cosh flows, which is gremer than the purchase cont of$60,000Yes, since the positve net present valse ind cates the investment will eam a rate of return greater than10 h.
Using your answer to Requirement 1, assume that Reshier Company is considering dropping any model with a negative product margin. What are the alternatives? Which alternative is more cost effective and by how much? (Assume that any traceable fixed costs can be avoided.) Do NOT round interim calculations and, if required, round your answer to the nearest dollar. will add $fill in the blank 8723bbfe4004028_3 to operating income 3. What if Reshier Company can only avoid 182 hours of engineering time and 4,800 hours of setup time that are attributable to Model 1? How does that affect the alternatives presented in Requirement 2? Which alternative is more cost effective and by how much? Do NOT round interim calculations and, if required, round your answer to the nearest dollar. will add $fill in the blank 8723bbfe4004028_5 to operating income
Coore Manufacturing has the following two possible projects. The required return is 12 percent. Year Project Y Project Z 0 -$27,500 -$55,000 1 13,500 19,500 234 2 11,900 26,000 3 14,300 17,500 9,900 24,000 a. What is the profitability index for each project? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.) b. What is the NPV for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) c. Which, if either, of the projects should the company accept? a. Project Y Project Z 1.38 ง b. Project Y 3 decimal places required. Project Z c. Accept project x
Myers Business Systems is evaluating the introduction of a new product. The possible levels of unit sales and the probabilities of their occurrence are given next: Possible Market Reaction Low response Moderate response High response Very high response Expected value Sales in Units 25 units Standard deviation a. What is the expected value of unit sales for the new product? Note: Do not round intermediate calculations and round your answer to the nearest whole unit. 35 40 70 Probabilities 0.40 units 0.20 0.10 0.30 b. What is the standard deviation of unit sales? Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
Determine which alternative, if any, should be chosen based on Annual Worth method using 15% MARR. Use Repeatability Method. Note: Show final answer to the nearest WHOLE NUMBER and show complete solution Answer the following: a. The Annual Worth of Alternative A is = $ Blank 1 b. The Annual Worth of Alternative B is = $ Blank 2 c. Choose Alternative (Type only A or B) = Blank 3
Two alternative machines will produce the same product, but one is capable of higher quality work, which can be expected to return greater revenue. The following are relevant data. Determine which is the better alternative, assuming repeatability and using SL. depreciation, an income-tax rate of 26%, and an after-tax MARR of 11%. Capital investment Life Calculate the AW value for the Machine A AWA(11%) 5 (Round to the nearest dollar) Terminal BV (and MV) Annual receipts Annual expenses Machine A $18,000 11 years $4,000 $157,000 $129,000 Click the icon to view the interest and annuity table for discrete compounding when the MARR is 11% per year. Machine $29,000 6 years 50 $178,000 $164,000

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