The Hub Store at a university in eastern Canada is considering purchasing a self-serve checkout machine similar to used in many grocery stores and other retail outlets. Currently the university pays part-time wages to students total $59,500 per year. A self-serve checkout machine would reduce part-time student wages by $39,500 per year. The machine would cost $330,000 and has a 10-year useful life. Total costs of operating the checkout machine would b $5,900 per year, including maintenance. Major maintenance would be needed on the machine in five years at a tot of $10,900. The salvage value of the checkout machine in 10 years would be $44,500. The CCA rate is 25%. Management requires a 9% after-tax return on all equipment purchases. The company's tax r 30%. Required: 1. Determine the before-tax net annual cost savings that the new checkout machine will provide. Net annual cost savings

The Hub Store at a university in eastern Canada is considering purchasing a self-serve checkout machine similar to used in many grocery stores and other retail outlets. Currently the university pays part-time wages to students total $59,500 per year. A self-serve checkout machine would reduce part-time student wages by $39,500 per year. The machine would cost $330,000 and has a 10-year useful life. Total costs of operating the checkout machine would b $5,900 per year, including maintenance. Major maintenance would be needed on the machine in five years at a tot of $10,900. The salvage value of the checkout machine in 10 years would be $44,500. The CCA rate is 25%. Management requires a 9% after-tax return on all equipment purchases. The company's tax r 30%. Required: 1. Determine the before-tax net annual cost savings that the new checkout machine will provide. Net annual cost savings

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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3 )
A software provider buys blank Bluray DVDs at $550 per hundred and currently uses 2 million DVDs per year. The manager believes that it may be cheaper to make the DVDs rather than buy them. Direct production costs (labour, materials, fuel) are estimated at $2.50 per DVD. The equipment needed would cost $3 million. The equipment should last for 15 years, provided it is overhauled every 5 years at a cost of $250 000 each time. The operation will require additional current assets of S400 000. The company's required rate of return is 12 per cent. Evaluate the proposal using NPV formula and not excel.
Kath is considering investing 500,000.00 to open a Milk Tea Station near a mall. Based on her feasibility study, she can sell 12 large size of milk tea per hour at a price of 25.00 per bottle. She is planning to hire 2 crews, with an hourly rate of 25.00, to manage the store which will operate 8hours per day, 6 days per week, and 50 weeks per year. However, additional out-of-pocket miscellaneous cost is 8,500.00 per month. More so, she wanted to have her crews a 2-week vacation every year with pay. If the capital now is earning 15% annually and she must write off her investment within 5 years with desire rate of return of at least 20% on his investment, would you recommend the investment? Use the rate of return method and annual worth method in making your decision.
A tiny firm in Bulacan makes portable threshers for the area's palay growers. The shop can create each thresher for P1,800 in labour. Each unit has a material cost of P2,500. The variable expenses per unit are P650, whereas the annual fixed costs are P69,000. How many portable threshers must be built and sold per year to break even if each unit costs P7,800? Computes and a graphical solution can both be used to back up your response. (Please offer a COMPLETE and UNDERSTANDABLE answer.) Also, be sure to write legibly.)
Ashley’s company is looking to add two new printers that will increase fixed costs by $75,000. The variable costs are $50 per order. The two new printers allow the business to increase their orders by 5000 annually. How many orders would have to be added to justify buying these new printers, vs not making any changes and continuing as they are? What other considerations might you consider in whether or not to make this purchase or not?
es Wendell's Donut Shoppe is investigating the purchase of a new $48,300 donut-making machine. The new machine would permit the company to reduce the amount of part-time help needed, at a cost savings of $6,800 per year. In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 1,700 dozen more donuts each year. The company realizes a contribution margin of $2.00 per dozen donuts sold. The new machine would have a six-year useful life. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. What would be the total annual cash inflows associated with the new machine for capital budgeting purposes? 2. What discount factor should be used to compute the new machine's internal rate of return? (Round your answers to 3 decimal places.) 3. What is the new machine's internal rate of return? (Round your final answer to the nearest whole percentage.) 4. In addition to the…
Sunland Inc. manufactures snowsuits. Sunland is considering purchasing a new sewing machine at a cost of $2.45 million. Its existing machine was purchased 5 years ago at a price of $1.8 million; six months ago, Sunland spent $55,000 to keep it operational. The existing sewing machine can be sold today for $244,395. The new sewing machine would require a one-time, $85,000 training cost. Operating costs would decrease by the following amounts for years 1 to 7: Year 1 2 3 4 5 6 7 $389,500 400,400 410,500 425,400 O 433,000 435,400 436,600 The new sewing machine would be depreciated according to the declining-balance method at a rate of 20%. The salvage value expected to be $379,200. This new equipment would require maintenance costs of $98,000 at the end of the fifth year. The cost of capital is 9%. Click here to view PV table. Use the net present value method to determine the following: (If net present value is negative then enter with negative signi preceding the number eg.-45 or…
Wendell's Donut Shoppe is investigating the purchase of a new $50,100 donut-making machine. The new machine would permit the company to reduce the amount of part-time help needed, at a cost savings of $5,900 per year. In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 2,600 dozen more donuts each year. The company realizes a contribution margin of $1.60 per dozen donuts sold. The new machine would have a six-year useful life. Required: 1. What would be the total annual cash inflows associated with the new machine for capital budgeting purposes? 2. What is the new machine's internal rate of return? Note: Round your final answer to the nearest whole percentage. 3. In addition to the data given previously, assume that the machine will have a $17,225 salvage value at the end of six years. Under these conditions, what is the internal rate of return? Note: Round your final answer to the nearest whole percentage. 1. Annual cash…
Billy Bob's Crab & Oyster Shack wants to reduce the cost of labour by replacing some labour with machines. If Billy Bob's were to purchase a machine to shuck the oysters, it can save $50,000 a year for 10 years. The new machine will cost $650,000 and it will be worth $50,000 at the end of the 10 year period. The firm believes it will need $10,000 in spare parts inventory (increase in NWC), which it can sell for the $5,000 at the end of the project. The machine has a 20% CCA rate and the firm has a 15% tax rate. If they want a 20% return on their investment what is the NPV? Round your answer to the nearest dollar, no dollar sign, no commas, put negative sign if needed.
A particular university was considering whether to offer a seminar for executives. The tuition would be USD 650 per person. Variable costs, including meals, parking, and materials, would be USD 80 per person. Certain costs of offering the seminar, including advertising, instructors' fees, room rent, and audiovisual equipment rent, would not be affected by the number of people attending. Such costs, which could be thought of as fixed costs, amounted to USD 8,000 for the seminar. If the University wants to have a profit of USD 7,000, how much revenue should they expect ? Round off your answer two decimal places. 20 15 14 none of these
Wendell's Donut Shoppe is investigating the purchase of a new $34,600 donut-making machine. The new machine would permit the company to reduce the amount of part-time help needed, at a cost savings of $6,500 per year. In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 2,500 dozen more donuts each year. The company realizes a contribution margin of $1.60 per dozen donuts sold. The new machine would have a six-year useful life.
You have an idea to sell handmade porcelain plates. The only investment needed is a furnace (oven) that you can buy for $40,000. The furnace assumed to last for 8 years and it will be fully depreciated by the straight-line method over its economic life. Other fixed costs amount to $1,000 per year. Taxes are 30 percent. Your discount rate is 15 percent. a. What is the accounting break-even point if each plate costs $4 to make and you can sell plates for $12 apiece? b. Calculate the financial break-even point

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