Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 10, Problem 27P
a.
To determine
The net after tax cash flow for each financing option.
b.
To determine
The VR’s PW cost of owning the equipment by borrowing.
c.
To determine
The VR’s PW cost of leasing the equipment.
d.
To determine
Selection of the project.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Emarpy Appliance produces all kinds of major appliances. Richard Feehan, the president of Emarpy, is concerned about the production policy for the company’s best-selling refrigerator. The demand for this has been relatively constant at about 8,000 units each year. The production capacity for this product is 200 units per day. Each time production starts, it costs the company $120 to move materials into place, reset the assembly line, and clean the equipment. The holding cost of a refrigerator is $50 per year. The current production plan calls for 400 refrigerators to be produced in each production run. Assume there are 250 working days per year. (a) What is the daily demand of this product? (b) If the company were to continue to produce 400 units each time production starts, how many days would production continue? (c) Under the current policy, how many production runs per year would be required? What would the annual setup cost be? (d) If the current policy continues, how many…
McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $780 per set and have a variable cost of $340 per set. The company has spent $170,000 for a marketing study that determined the company will sell 62,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 10,400 sets of its high-priced clubs. The high-priced clubs sell at $1,150 and have variable costs of $610. The company will also increase sales of its cheap clubs by 12,400 sets. The cheap clubs sell for $370 and have variable costs of $160 per set. The fixed costs each year will be $9,900,000. The company has also spent $1,200,000 on research and development for the new clubs. The plant and equipment required will cost $37,500,000 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $1,900,000 that will be returned at the end of the project. The tax rate is 22 percent, and the cost of…
Scenario 9.3
The Talbot Company uses electrical assemblies to produce an array of small appliances. One of its high cost /high volume
assemblies, the XO-01, has an estimated annual demand of 8,000 units. Talbot estimates the cost to place an order is $50, and the
holding cost for each assembly is $20 per year. The company operates 250 days per year.
Use the information in Scenario 9.3. What is the economic order quantity for the XO-01?
O greater than 180 units but less than or equal to 250 units
O greater than 250 units
O less than or equal to 100 units
O greater than 100 units but less than or equal to 180 units
Chapter 10 Solutions
Contemporary Engineering Economics (6th Edition)
Ch. 10 - Prob. 1PCh. 10 - Prob. 2PCh. 10 - Prob. 3PCh. 10 - Prob. 4PCh. 10 - Prob. 5PCh. 10 - Prob. 6PCh. 10 - Prob. 7PCh. 10 - Prob. 8PCh. 10 - Prob. 9PCh. 10 - Prob. 10P
Ch. 10 - Prob. 11PCh. 10 - Prob. 12PCh. 10 - Prob. 13PCh. 10 - Prob. 14PCh. 10 - Prob. 15PCh. 10 - Prob. 16PCh. 10 - Prob. 17PCh. 10 - Prob. 18PCh. 10 - Prob. 19PCh. 10 - Prob. 20PCh. 10 - Prob. 21PCh. 10 - Prob. 22PCh. 10 - Prob. 23PCh. 10 - Prob. 24PCh. 10 - Prob. 25PCh. 10 - Prob. 26PCh. 10 - Prob. 27PCh. 10 - Prob. 28PCh. 10 - Prob. 29PCh. 10 - Prob. 30PCh. 10 - Prob. 31PCh. 10 - Prob. 32PCh. 10 - Prob. 33PCh. 10 - Prob. 34PCh. 10 - Prob. 35PCh. 10 - Prob. 36PCh. 10 - Prob. 37PCh. 10 - Prob. 1STCh. 10 - Prob. 2STCh. 10 - Prob. 3STCh. 10 - Prob. 4STCh. 10 - Prob. 5ST
Knowledge Booster
Similar questions
- the marginal profit of this company is determine by the following for each unit. If the total profit for 6 units is 230$, what would be the total profit for a total of 10 units? 80 %3Darrow_forwardMoses Inc. is a small electric company that provides power to customers in a small rural area in the Southwest. The company is currently maximizing its profits by selling electricity to consumers at a price of $0.15 per kilowatt-hour. Its marginal cost is $0.05 per kilowatt-hour, and its average cost is $0.15 per kilowatt-hour. A government regulator is considering a proposal to regulate the firm’s price at $0.05 per kilowatt-hour. Would such a policy improve social welfare? Explainarrow_forwardYou are the marketing manager of the Business Unit (BU) that produces polystyrene (which is an input to making lightweight rigid foam). The current Demand/Supply balance, as measured by the ICIS price, is $800 per ton of polystyrene. The BU has 2 plants and can produce a total of 1800 tons. At full capacity utilization, the BU’s average variable cost equals $1300/t and its average total cost equals $1700/t.Plant 1 has a capacity of 600 tons and a marginal cost of $900/t. Plant 2 has capacity of 1200 tons and a marginal cost of $1500/t. Due to exit of one competitor, you expect next year’s polystyrene ICIS price to increase to $1200. 1. How much volume of polystyrene do you expect to produce next year, if any? 2. What is your expected contribution margin for next year? 3. What is your expected profit for next year?arrow_forward
- You are the marketing manager of the Business Unit (BU) that produces polystyrene (which is an input to making lightweight rigid foam). The current Demand/Supply balance, as measured by the ICIS price, is $800 per ton of polystyrene. The BU has 2 plants and can produce a total of 1800 tons. At full capacity utilization, the BU’s average variable cost equals $1300/t and its average total cost equals $1700/t. Plant 1 has a capacity of 600 tons and a marginal cost of $900/t. Plant 2 has capacity of 1200 tons and a marginal cost of $1500/t. Due to exit of one competitor, you expect next year’s polystyrene ICIS price to increase to $1200. How much volume of polystyrene do you expect to produce next year, ifany? 2.What is your expected contribution margin for nextyear? 3. What is your expected profit for nextyear?arrow_forwardPlease help!arrow_forwardAcme Manufacturing Co. and Compressors Institute of America, Inc. orally agreed that CIA would custom-manufacture a compressor for Acme at a price of $120,000. After CIA completed the work at a cost of $90,000, Acme notified CIA that the compressor was no longer needed. CIA is holding the compressor and has requested payment from Acme. CIA has been unable to resell the compressor for any price after reasonable attempts. CIA incurred storage fees of $2,000. If Acme refuses to pay CIA and CIA sues Acme, the most CIA will be entitled to recover is: Group of answer choices Nothing, because the contract was verbal only. As much as they want because the CIA has special powers. $120,000. $90,000. $122,000.arrow_forward
- The Electro-comp Corporation manufactures 2 electrical products: air conditioners and large fans. The assembly process for each is similar in that both require a certain amount of wiring and drilling. Each air conditioner takes 5 hours of wiring and 3 hours of drilling. Each fan must go through 3 hours of wiring and 2 hours of drilling. To ensure an adequate supply of air conditioners for a contract, at least 50 air conditioners should be manufactured. Electro-comp management also insists that no more than 60 and less than 15 fans be produced during this production period. In addition, management imposed a constraint on the total number of air conditioners and fans to be made not more than 100. During the next production period, 300 hours of wiring and 240 hours of drilling times are available. Each air conditioner sold yields a profit of $50. Each fan assembled may be sold for a $30 profit. Identify the redundant constraints of the problem and show the range of the right-hand side…arrow_forwardThe Electro-comp Corporation manufactures 2 electrical products: air conditioners and large fans. The assembly process for each is similar in that both require a certain amount of wiring and drilling. Each air conditioner takes 5 hours of wiring and 3 hours of drilling. Each fan must go through 3 hours of wiring and 2 hours of drilling. To ensure an adequate supply of air conditioners for a contract, at least 50 air conditioners should be manufactured. Electro-comp management also insists that no more than 60 and less than 15 fans be produced during this production period. In addition, management imposed a constraint on the total number of air conditioners and fans to be made not more than 100. During the next production period, 300 hours of wiring and 240 hours of drilling times are available. Each air conditioner sold yields a profit of $50. Each fan assembled may be sold for a $30 profit. Formulate this production mix situation as an LP problem to find the best combination of…arrow_forwardThe Talbot Company uses electrical assemblies to produce an array of small appliances. One of its high cost / high volume assemblies, the XO-01, has an estimated annual demand of 8,000 units. Talbot estimates the cost to place an order is $50, and the holding cost for each assembly is $20 per year. The company operates 250 days per year. 1. Use the information in the scenario above. What is the economic order quantity for the XO-01?arrow_forward
- Assume that Company A and Company B are in different time zones. Company A is located in the Eastern time zone, while Company B is located in the Western time zone. Except during peak periods, both operate at 70% capacity. During the peak period, each of them is operating at full capacity. The peak hour lasts around 50 minutes and begins at 8:00 a.m. and ends at 4:00 p.m. local time. Do you think it's a good idea for these two companies to perform a merger? Use the principle of economies of scale to support your answer.arrow_forwardIndustrial Designs has been awarded a contract to design a label for a new wine produced by Lake View Winery. The company estimates that 120 hours will be required to complete the project. The firm's three graphic designers available for assignment to this project are Lisa, a senior designer and team leader; David, a senior designer; and Sarah, a junior designer. Because Lisa has worked on several projects for Lake View Winery, management specified that Lisa must be assigned at least 40% of the total number of hours assigned to the two senior designers. To provide label designing experience for Sarah, the junior designer must be assigned at least 15% of the total project time. However, the number of hours assigned to Sarah must not exceed 25% of the total number of hours assigned to the two senior designers. Due to other project commitments, Lisa has a maximum of 50 hours available to work on this project. Hourly wage rates are $30 for Lisa, $25 for David, and $18 for Sarah. (a)…arrow_forwardRedleaf company's market research department works on the manufacture and marketing of a winter tire for vehicles. Currently the price is 10$, and the demand is 36000 units. When the price is increased to 15$, the company expects the demand to be 34000 units (assume that price is linearly related to demand.). Company is following a make-to-order policy for their production, meaning that they make production as much as ordered from their dealers. The dealers make orders 3 times a year, on January, May and September. The company has 23 dealers, who do not have any capacity restriction on their orders. Yet, the above information is a country- wise research, and shows the aggregate demand (sum of all dealers' orders) for each price. Regardless of the production amount, the company faces with a 4690$ of administrative cost for production, in addition to 1,5 $ cost of raw materials and labour costs per each units produced. Which of the following presents the correct marginal profit function,…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning