This-Test-Is-a-Breeze, Inc. owns a warehouse in Wilmington, DE. The company has decided to use the warehouse for the production of plastic polymers. To do so the company will forgo the option of renting the warehouse to a third party, which would have generated $50,000 of annual cash inflow. The $50,000 that the company is forgoing to pursue another investment is: Sunk Cost Opportunity Cost Erosion Cost Variable Cost
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![This-Test-Is-a-Breeze, Inc. owns a warehouse in Wilmington, DE. The company has decided to
use the warehouse for the production of plastic polymers. To do so the company will forgo the
option of renting the warehouse to a third party, which would have generated $50,000 of annual
cash inflow. The $50,000 that the company is forgoing to pursue another investment is:
Sunk Cost
Opportunity Cost
Erosion Cost
Variable Cost](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F97ba8906-b5ea-4c74-b0a8-57780dde1c1d%2F9b4e6121-2546-4aff-90f2-d0b725835b85%2F5c1rest_processed.png&w=3840&q=75)
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- Carl's Connection manufactures add-on products for the automobile industry. The manager at Carl's Connections has just been presented the opportunity to invest in two independent projects. The first is an air conditioner for the back seats of vans. The second opportunity is turbocharger for sedans. Withoud either investment, the company currently expects average assets for the coming year to be $28.9 million and expects operating income to be $4.335 million. Below is the expected cost for each investment and their expected operating income. It can be assumed that the outlay is the value of the asset. Air Conditioner TurboCharger Outlay $750,000.00 $600,000.00 Operating Income $90,000.00 $82,080.00 Compute the ROI for each investment by itself and round to nearest hundreth after in percent formMiddle Industries produces a sensor for use in manufacturing. It produces the sensor in a plant with an annual practical capacity of 75,000 units. The variable cost of the sensor is $185.00 per unit, and the fixed costs of the plant are $12,375,000 annually. Current annual demand is 55,000 sensors. Middle Industries bought the plant because it was close to its other manufacturing facilities and was available for sale when they were searching for a location. Required: What cost per sensor should the cost system report to facilitate management decision making? What is the cost of excess capacity? What cost per sensor would the cost system report if the smallest manufacturing plant that could be built was able to produce 75,000 sensors? What would be the cost of excess capacity?AMD is contemplating a decision to either continue producing a unique line of microprocessors, or discontinue production. • The AMD factory manufactures approximately 100,000 of such processors and generates $3,000,000 in revenues and incurs $2,000,000 in variable costs. • AMD estimates that if the product is discontinued ADM would save $ 1,500,000 in fixed manufacturing costs in engineering support and depreciation costs of production equipment. • Should AMD keep or discontinue production of this product line?
- Bermuda Co. must choose between gas-powered and an electric-powered forklift truck for moving materials in its factory. Because both forklifts perform the same function, the firm will choose only one. (They are mutually exclusive investments.) The electric-powered truck will cost more, but it will be less expensive to operate; it will cost $110,000, whereas the gas powered truck will cost $40,000. The required rate of return that applies to both investments is 14 percent. The life for both types of truck is estimated be 12 years, during which time the net cash flows for the electric-powered truck will be $23,500 per year and those for gas-powered truck will be $10,000 per year. Calculate the NPV and IRR for each type of truck, and decide which to recommend.Whispering Winds Company manufactures automobile components for the worldwide market. The company has three large production facilities in Virginia, New Jersey, and California, which have been operating for many years. Brett Harker, vice president of production, believes it is time to upgrade operations by implementing computer-integrated manufacturing (CIM) at one of the plants. Brett has asked corporate controller Connie Carson to gather information about the costs and benefits of implementing CIM. Carson has gathered the following data: Initial equipment cost $ 6,174,000 Working capital required at start-up $ 600,000 Salvage value of existing equipment 76,350 Annual operating cost savings 855,120 Salvage value of new equipment at end of its useful life 203,600 Working capital released at end of its useful life 600,000 Useful life of equipment 10 years Whispering Winds Company uses a 12% discount rate. Click here to view the factor table $ $ $ $Use the following to answer questions 76-79: (Ignore income taxes in this problem.) Perky Food Corporation produces and sells coffee jelly. Perky currently produces the jelly using a manual operation but is considering the purchase of machinery to automate its operations. Information related to the two operations is as follows: Cost of machinery. Useful life of machinery. Expected salvage value in 12 years. Expected annual revenue (50,000 jars).. Expected annual variable costs. Expected annual fixed costs. ***** B) 12.1% C) 14.5% D) 22.9% Manual Operation $210,000 $42,000 $72,000 Perky's discount rate is 12%. Perky uses the straight-line method of depreciation. 76. What is the net present value of automating operations using the incremental cost approach? Answer: A Level: Medium LO: 6 Automated Operation $420,000 $210,000 $135,000 $30,000 12 years $0 A) $11,940 B) $56,940 C) $(104,106) D) $112,684 Answer: C Level: Medium LO: 1 77. Within what range does the internal rate of return…
- A European candy manufacturing plant manager must select a new irradiation system to ensure the safety of specific ingredients, while being economical. The two alternatives available have the following estimates: System First Cost, $ CFBT, $ per Year Life, Years A B -150,000 60,000 -80,000 20,000 5 The company is in the 35% tax bracket and assumes classical straight line depreciation for alternative comparisons performed at an after-tax minimum acceptable rate of return (MARR) of 8% per year. A salvage value of zero is used when depreciation is calculated; however, system B can be sold after 5 years for an estimated 8% of its first cost. System A has no anticipated salvage value. Determine which is more economical using an annual worth (AW) analysis worked by hand. The annual worth analysis for system A is determined to be $1 The annual worth analysis for system Bis determined to be $ System B D is selected.Annie's Homemade currently owns one push cart along with a branded tent to facilitate off-site sales. The company is considering buying a second push cart and tent for $4,500 to expand its off-site sales opportunities. Because the company's cargo trailer has the capacity to transport two push carts, there is no need to buy an additional trailer at this time. Annie's provided the following estimates to assist with analyzing the investment in an additional push cart: Additional sales events per month (in June, July, August, and September) Average number of servings sold per event Selling price per serving Ingredients and packaging cost per serving Average time for manager to make one batch of 100 servings of ice cream Average time for employees to pre-package one serving of ice cream Pickup truck diesel fuel, oil, and diesel exhaust fluid expenses Average duration of each event (including drive time) Average number of employees working at each event Hourly wage rate for managers Hourly…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…
- Annie's Homemade currently owns one push cart along with a branded tent to facilitate off-site sales. The company is considering buying a second push cart and tent for $4,500 to expand its off-site sales opportunities. Because the company's cargo trailer has the capacity to transport two push carts, there is no need to buy an additional trailer at this time. Annie's provided the following estimates to assist with analyzing the investment in an additional push cart: Additional sales events per month (in June, July, August, and September) Average number of servings sold per event Selling price per serving Ingredients and packaging cost per serving Average time for manager to make one batch of 100 servings of ice cream Average time for employees to pre-package one serving of ice cream Pickup truck diesel fuel, oil, and diesel exhaust fluid expenses Average duration of each event (including drive time) Average number of employees working at each event Hourly wage rate for managers Hourly…A firm that manufactures paper is considering a project to set up a logging operation. Wood pulp generated by the project - normally an unwanted by-product of a logging operation - is an input to the paper manufacturing process. This will save the company $340,000 in wood pulp purchases, but it will cost $50,000 more to transport the wood pulp to the paper factory than it would cost to dump it as waste. How would you describe this situation in terms of the NPV analysis for the logging operation? Question 2Answer a. There is a positive externality equal to $290,000 which should be included in the NPV analysis. b. There is a positive externality equal to $340,000 which should be included in the NPV analysis. c. There is a negative externality equal to $290,000 which should be included in the NPV analysis. d. There is a negative externality equal to $340,000 which should be included in the NPV analysis.Two alternative locations are under consideration for a new plant: Jackson, Mississippi, and Dayton, Ohio. The Jackson location is superior in terms of costs. However, management believes that sales volume would decline if this location were chosen because it is farther from the market, and the firm's customers prefer local suppliers. The selling price of the product is $375 per unit in either case. Use the following information to determine which location yields the higher total profit per year: Location Jackson Dayton Annual Fixed Cost $2,100,000 $3,000,000 Variable Cost per Unit $45 $80 Forecasted Demand per Year 40,000 units 39,000 units The annual profit from Jackson is $8575000. (Enter your response as an integer.)
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