Please do 8-38 ## Equipment Investment Decision for New England Soap Company**Scenario:**The New England Soap Company is evaluating the addition of processing equipment to their plant. This equipment will help remove impurities from raw materials, enabling the purchase of lower-grade materials at a reduced cost while upgrading them for product use.**Objective:**Determine which equipment alternative should be selected using a challenger-defender rate of return analysis.**Equipment Options:**- **Option A:** - Initial Investment: $8,500 - Annual Savings in Materials Costs: $3,500 - Annual Operating Cost: $2,100- **Option B:** - Initial Investment: $18,500 - Annual Savings in Materials Costs: $6,000 - Annual Operating Cost: $3,000- **Option C:** - Initial Investment: $26,500 - Annual Savings in Materials Costs: $7,400 - Annual Operating Cost: $3,200- **Option D:** - Initial Investment: $30,000 - Annual Savings in Materials Costs: $9,000 - Annual Operating Cost: $4,100**Financial Consideration:**The company is capable of obtaining a 13% annual return on its investments in other projects. They are willing to invest in the processing equipment only if it meets or exceeds this return rate.**Analysis Tools:**A challenger-defender rate of return analysis will help in determining which equipment will provide a return greater than or equal to the current 13% benchmark. **Text Transcription:**it can obtain 14% annual return on each increment of money invested. Which one, if any, of the alternatives should be selected? Use a challenger-defender rate of return analysis.**Cash vs. Loan vs. Lease**38-39 Frequently we read in the newspaper that one should lease a car rather than buying it. For a typical 24-month lease on a car costing $9400, the monthly lease charge is about $267. At the end of the 24 months, the car is returned to the lease company (which owns the car). As an alternative, the same car could be bought with no down payment and 24 equal monthly payments, with interest at a 12% nominal

Given information There are 4 projects: A,B,C and D For project A Initial investment: $8500 Annual saving=$3500 Annual cost=$2100 Annual cash inflow=3500-2100=$1400 For project B Initial investment: $18500 Annual saving=$6000 Annual cost=$3000 Annual cash inflow=6000-3000=$3000 For project C Initial investment: $26500 Annual saving=$7400 Annual cost=$3200 Annual cash inflow=7400-3200=$4200 For project D Initial investment: $30000 Annual saving=$9000 Annual cost=$4100 Annual cash inflow=9000-4100=$4900 Minimum return requirement=14% from each project. By using IRR analysis Formula table Projects A, B, and D are giving an annual return of 14%. To find one alternative requires to an analysis of incremental IRR Selection criterion: ∆IRRHigh cost-Low cost >MARR--- Select a high-cost project and reject a low-cost project. ∆IRRHigh cost-Low cost <=MARR--- Select a low-cost project and reject a high-cost project. Here Challenger--- High -cost alternative Defender---- low-cost alternative ∆IRRB-A (14%)=MARR--- Select an A project and reject a B project. Since project IRR for the project C=13%<14%-- rejected C project. ∆IRRC-A (14%)=MARR--- Select an A project and reject C project. Therefore, processing equipment A should be selected.

Business

Economics

The New England Soap Company is considering adding some processing equipment to the plant to aid in the removal of impurities from some raw materials. By adding the processing equipment, the firm can purchase lower-grade raw material at reduced cost and upgrade it for use in its products. Four different pieces of processing equipment

The New England Soap Company is considering adding some processing equipment to the plant to aid in the removal of impurities from some raw materials. By adding the processing equipment, the firm can purchase lower-grade raw material at reduced cost and upgrade it for use in its products. Four different pieces of processing equipment

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

You can earn 10% a year on your savings. Your dad offers you a Holiday Gift of $1000 this year, $2000 next Holiday, $3000 Holiday 2021. If instead he offered you $6,000 Holiday 2020 (next year). Which should you pick, the single payment or the 3 payments. SHOW YOUR WORK Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
Why is it -1000 at NVP (Beta), not -10000
11
The future value of 1000 Rand for 8% interest rate over 6 years is a certain value. At what interest rate will you get the same future value when you change the period to 3 years for the same 1000 Rand? Hint use goal seek
What are the five main types of engineering economic decisions?
The owner shop is contemlating adding anew product which will require additional mouthly payment of 6000, variable costs would be brirr. 2 per new product & its selling price is brirr. 7 each What would be the profit(loss) be if 1000 unit were sold in month?
What is diomond water paraodx
I need typing clear urjent no chatgpt use i will give 5 upvotes
Given the following information for an insurance company that writes 24-month term policies: Number of Vehicles 50 100 Policy Group A B Effective Date January 1, 2010 Expiration Date December 31, 2011 July 1, 2010 June 30, 2012 All policies within each group have the same effective date. (a) Calculate the earned car-years for calendar year 2011. (b) Calculate the earned car-years for policy year 2010 evaluated as of December 31, 2010 and as of December 31, 2011. (c) Assume Policy Group B cancels on January 1, 2011. Calculate the 2010 policy year written car- years evaluated as of December 31, 2010 and as of December 31, 2011 for Policy Group B. (d) Assume Policy Group B cancels on July 1, 2011. Calculate the 2010 and 2011 calendar year written car-years for Policy Group B.
pls help with below homwrk queistions
can you do part b, c, d and e i can hse 4 questions for it