OBLEM 19.3ATarget CostingMeiger Mining, Inc., has just discovered two new mining sites for iron ore. logists and engineers have come up with the estimates on the following page regarding costs and ore ds if the mines are opened.page 879 Site ASite BVariable extraction costs per ton$3.80$4.00Fixed costs r the life of the mine: Blasting$150,000$185,000Construction225, 000240, 000 Maintenance 00020, 000Restoration costs 40, 00035, 000Total fixed costs$440, 000$480, 000 Total tons of ore that can extracted over the life of the mine: 200, 000160,000 Meigers owners currently demand a return of 20 cent of the market price of iron ore.Instructionslf the current market price of iron ore is $8 per ton, what is igers target cost per ton? Given the $8 market price, should either of the mines be opened? The engineer king on Site B believes that if a custom conveyor system is installed, the variable extraction cost could be

OBLEM 19.3ATarget CostingMeiger Mining, Inc., has just discovered two new mining sites for iron ore. logists and engineers have come up with the estimates on the following page regarding costs and ore ds if the mines are opened.page 879 Site ASite BVariable extraction costs per ton$3.80$4.00Fixed costs r the life of the mine: Blasting$150,000$185,000Construction225, 000240, 000 Maintenance 00020, 000Restoration costs 40, 00035, 000Total fixed costs$440, 000$480, 000 Total tons of ore that can extracted over the life of the mine: 200, 000160,000 Meigers owners currently demand a return of 20 cent of the market price of iron ore.Instructionslf the current market price of iron ore is $8 per ton, what is igers target cost per ton? Given the $8 market price, should either of the mines be opened? The engineer king on Site B believes that if a custom conveyor system is installed, the variable extraction cost could be

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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#24 * Using NPW to Decide Between Competing Projects: Machine X has an initial cost of $12,000 and annual maintenance of $700 per year. It has a useful life of four years and no salvage value at the end of that time. Machine Y costs $22,000 initially and has no maintenance costs during the first year. Maintenance is $200 at the end of the second year and increases by $200 per year thereafter. Machine Y has a useful life of eight years and an anticipated salvage value of $5,000 at the end of its useful life. If the MARR is 6%, what is the approximate Net Present Worth (NPW) of machine Y? A. -$33,015 B. -$23,781 C. -$22,831 D. -$19,365
3 TWO PROJECTS A company wishes to use a five-year time scale over which to appraise the following projects, with no allowance for scrap values. Its required rate of return is 17%. Project X Purchase of patent rights to a new process at an initial cost of $320,000 payable immediately. The new process will enable the company to reduce its labour force, at present incurring a total wages bill of $280,000, by a quarte: and will allow an increased production capacity of 5,000 units per year of another existing product which at present is sold at $12 per unit with direct costs of $6. There is an 80% chance that the extra potential production could all be sold, with a 20% chance of demand only taking up an extra 3,000 units per year. Production would be adjusted to match demand. This product is made with hardly any labour. Project Y Installation of a mini-computer to deal with the accounting functions at an annual rental charge of $50.000, paid in advance At present the company uses an IT…
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Subject: accounting
Question 5 A machine that have the following cost is under consideration for a new manufacturing process. The interest rate is 6% compounded semiannually. First cost = $70,000 Semiannual operating cost = 6,000 Semiannual income = 18,000 Salvage value = 9,000 Life in years = 5 years a. PW = $29,059 b. PW = $39,059 O c. PW = -$39,059 d. PW = $19,059
Problem 5: Platypus Corporation's managers have presented the company's management with two proposals for expanding its production capacity. Based on the following two different alternatives, which proposal should they adopt? Cost of the Equipment Required Project 1 $250,000 Working Capital Investment Required 0 Annual Cash Inflows $65,000 Maintenance cost in year 4 $15,000 Maintenance cost in year 6 0 Salvage Value of Equipment in 8 Years $12,000 Project 2 $100,000 $150,000 $50,000 0 $15,000 0 Both projects have a life of 8 years. In 8 years Project 2's working capital will be released and be available to invest in other projects. The company has a discount rate of 16% Required: 1) Calculate the net present value for each project. 2) Based solely on the net present value of the project, which alternative would you recommend the company invest in? Why?