The Crane Inc., a manufacturer of low-sugar, low-sodium, low-cholesterol TV dinners, would like to increase its market share in theSunbelt. In order to do so, Crane has decided to locate a new factory in the Panama City area. Crane will either buy or lease a sitedepending upon which is more advantageous. The site location committee has narrowed down the available sites to the followingthree very similar buildings that will meet their needs.Building A: Purchase for a cash price of $610,000, useful life 27 years.Building B: Lease for 27 years with annual lease payments of $70,500 being made at the beginning of the year.Building C: Purchase for $656,700 cash. This building is larger than needed; however, the excess space can be sublet for 27 years at anet annual rental of $6,570. Rental payments will be received at the end of each year. The Crane Inc. has no aversion to being alandlord.Click here to view factor tables.In which building would you recommend that The Crane Inc. locate, assuming a 10% cost of funds? (Round factor values to 5 decimalplaces, e.g. 1.25124 and final answer to O decimal places, e.g.458,581.)Building A$Building CLABuilding B $LA$LANet Present ValueThe Crane Inc. should locate itself in

Lease payments are regular, periodic payments made by a lessee to a lessor in exchange for the use…

Answered: The Crane Inc., a manufacturer of…

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 Monty Inc., a manufacturer of low-sugar, low-sodium, low-cholesterol TV dinners, would like to increase its market share in the Sunbelt. In order to do so, Monty has decided to locate a new factory in the Panama City area. Montyy depending upon which is more advantageous. The site location committee has narrowed down the three very similar buildings that will meet their needs. Building A: Purchase for a cash price of $613,700, useful life 27 years. Building B: Lease for 27 years with annual lease payments of $70,100 being made at the beginning of the year. Building C: Purchase for $659,100 cash. This building is larger than needed; however, the excess space can be sublet for 27 years at a net annual rental of $6,470. Rental payments will be received at the end of each year. The Monty Inc. has no aversion to being a landlord. Click here to view factor tables. In which building would you recommend that The Monty Inc. locate, assuming a 12% cost of funds? (Round factor values to 5…
Finisterra, S.A. Finisterra, S.A., located in the state of Baja California, Mexico, manufactures frozen Mexican food which enjoys a large following in the U.S. states of California and Arizona to the north. In order to be closer to its U.S. market, Finisterra is considering moving some of its manufacturing operations to southern California. Operations in California would begin in year 1 for three years and have the following attributes: E The operations in California will pay 81% of its accounting profit to Finisterra as an annual cash dividend. Mexican taxes are calculated on grossed up dividends from foreign countries, with a credit for host-country taxes already paid. The corporate income tax rate in U.S. is 28% (the tax rate in Mexico is lower than the rate in the U.S.), the current spot exchange rate is Ps10.00/$, and the exchange rates for the next three years will be Ps11.00/S, Ps12.00/S, and Ps13.00/S, respectively. Assume the after-tax dividends received by the parent in years…
The cost of introducing the products in selected geographic areas for gauging consumer response is $150K. If the company decides to introduce the product this way, it would need to see the responses to the products before they decide to launch the product line nationally. The probability of a favorable response in the selected geographical areas is estimated at O.60. La Comida can also decide not to go for the launching in the product in selected geographical areas and go ahead with the nationwide launch or not. If La Comida Foods decides to go full-blast in launching the products nationally and are a success, the company estimates that they will gain an annual income of $1.6 million. If the products are not a hit, the company will realize losses to the tune of $700K. La Comida estimates the probability of success for the sauces and marinades to be 0.50, if these are introduced without gauging consumer response.
Due to increased product demand, the Jax Company has insufficient floor space in its current production facility. Three alternative solutions have been identified: (A1) do nothing, (A2) rearrange an area of the existing floor space, or (A3) build an addition to the present plant. Analysis is conducted assuming a five-year planning horizon and an MARR of 30%. There is some uncertainty as to whether Jax will face competition for the new business. If alternative A1 is pursued, the estimated Present Worth will be $0. If alternative A2 is chosen, the Present Worth realized will depend on whether competition arises. Under A2, there is a 60% chance of competition occurring. The estimated PW under A2 will be $50,000 if competition arises; $30,000 if there is no competition. Under A3, there is a 20% chance of competition. The estimated PW under A3 will be -$100,000 if competition arises; $90,000 if there is no competition. (a) Based on expected PW, what course should Jax follow? (b)…
The Aubey Coffee Company is evaluating the within-plant distribution system for its new roasting, grinding, and packing plant. The two alternatives are (1) a conveyor system with a high initial cost but low annual operating costs and (2) several forklift trucks, which cost less but have considerably higher operating costs. The decision to construct the plant has already been made, and the choice here will have no effect on the overall revenues of the project. The cost of capital for the plant is 12%, and the projects' expected net costs are listed in the following table: a. What is the IRR of each alternative? The IRR of alternative 1 is -Select- Year 0 1 2 3 4 5 -Select- Expected Net Cost Forklift -$200,000 -160,000 -160,000 -160,000 -160,000 -160,000 Conveyor -$500,000 -120,000 -120,000 -120,000 -120,000 -20,000 The IRR of alternative 2 is-Select- b. What is the present value of costs of each alternative? Do not round Intermediate calculations. Round your answers to the nearest…
A component of the direct materials cost requires the nectar of a specific plant in South America. If the company could eliminate this special ingredient, the materials cost would decrease by 25%. However, this would require design changes of $300,000 to engineer a chemical equivalent of the ingredient. Will this design change allow the product to meet its target cost?
The Bathtub Division of Pronghorn Plumbing Corporation has recently approached the Faucet Division with a proposal. The Bathtub Division would like to make a special "ivory" tub with gold-plated fixtures for the company's 50-year anniversary. It would make only 5,200 of these units. It would like the Faucet Division to make the fixtures and provide them to the Bathtub Division at a transfer price of $164. If sold externally, the estimated unit variable cost would be $148. However, by selling internally, the Faucet Division would save $7 per unit on variable selling expenses. The Faucet Division is currently operating at full capacity. Its standard unit sells for $52 per unit and has variable costs of $35. Compute the minimum transfer price that the Faucet Division should be willing to accept. Minimum transfer price $ Should they accept this offer? They this offer.
The owner of Barb’s Burgers has suggested the firm should invest in more moderntechnology and created a list of potential changes she thinks may be helpful as aninvestment. She has asked you to analyze the four potential choices and comment onwhat this would change in terms of cost: Allow Barb’s Burgers to be delivered via the pre-existing food delivery systems.For example, allow people from Doordash/Uber Eats to pick-up orders and deliverthem. This would require the firm to make some minor changes and result in fewerparking spaces for customers dining at the restaurant. • Question: Argue how each of these is likely to change the cost of the firm once implemented (i.e. are any of these a fixed cost or a variable cost). How this adjust the amount of labour and/or capital currently necessary for the firm? Would the technology be a general technology, labour-saving, or capital-saving? Also mention the parking space.
pls answer the following questions. thanks

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