Bailey, Inc., is considering buying a new gang punch that would allow them to produce circuit...
Bailey, Inc., is considering buying a new gang punch that would allow them to produce circuit boards more efficiently. The punch has a first cost of $60,000 and a useful life of 15 years. At the end of its useful life, the punch has no salvage value. Annual labor costs would increase $3,500 using the gang punch, but annual raw material costs would decrease $7,000. MARR is 4.75 %/year.
1.What is the present worth of this investment?
2.What is the decision rule for judging the attractiveness of investments based on present worth?
3.Should Bailey buy the gang punch?
Homework Answers
initial cost = 60000
MARR = 4.75%
t = 15 yrs
Annual savings = 7000
Annual cost = 3500
Net annual revenue = 7000 - 3500 = 3500
PW = -60000 + 3500*(P/A, 4.75%,15)
= -60000 + 3500 * 10.55730
= -23049.45
Decision rule : when PW>0, project should be selected
No as PW<0
Add Answer to:
Bailey, Inc., is considering buying a new gang punch that would
allow them to produce circuit...
Bailey, Inc., is considering buying a new gang punch that would allow them to produce circuit boards more efficiently.
Bailey, Inc., is considering buying a new gang punch that would allow them to produce circuit boards more efficiently. The punch has a first cost of $160,000 and a useful life of 15 years. At the end of its useful life, the punch has no salvage value. Labor costs would increase $5,500 per year using the gang punch, but raw material costs would decrease $16,500 per year. MARR is 5%/year. What is the internal rate of return of this investment? What is...
Aerotron Electronics is considering purchasing a water filtration system to assist in circuit board manufacturing. The...
Aerotron Electronics is considering purchasing a water filtration system to assist in circuit board manufacturing. The system costs $40,000. It has an expected life of 7 years at which time its salvage value will be $7,500. Operating and maintenance expenses are estimated to be $2,000 per year. If the filtration system is not purchased, Aerotron Electronics will have to pay Bay City $12,000 per year for water purification. If the system is purchased, no water purification from Bay City will...
Galvanized Products is considering purchasing a new computer system for its enterprise data management system.
Galvanized Products is considering purchasing a new computer system for its enterprise data management system. The vendor has quoted a purchase price of $100,000 Galvanized Products is planning to borrow one fourth of the purchase price from a bank at 15% compounded annually. The loan is to be repaid using equal annual payments over a 3-year period. The computer system is expected to last 5 years and has a salvage value of $5,000 at that time. Over the S-year period,...
Aerotron Electronics is considering the purchase of a water filtration system to assist in circuit board...
Aerotron Electronics is considering the purchase of a water filtration system to assist in circuit board manufacturing. The system costs $40,000. It has an expected life of 7 years at which time its salvage value will be $7,500. Operating and maintenance expenses are estimated to be $2,000 per year. If the filtration system is not purchased, Aerotron Electronics will have to pay Bay City $12,000 per year for water purification. If the system is purchased, no water purification from Bay...
A company is considering buying a new piece of machinery that costs $30,000 and has a...
A company is considering buying a new piece of machinery that costs $30,000 and has a salvage value of $8,000 at the end of its 5-year useful life. The machinery nets $5,000 per year in annual revenues. MARR = 8%. The internal rate of return (IRR) on this investment is between A. 2%-3%. B. 11%-12%. C. 6%-7%. D. 13%-14%. E. 4%-5%. Using the information in the previous question #5, if the company considering purchasing the machine uses a MARR of...
Aerotron Electronics is considering purchasing a water filtration system to assist in circuit board manufacturing. The...
Aerotron Electronics is considering purchasing a water filtration system to assist in circuit board manufacturing. The system costs $40,000. It has an expected life of 7 years, at which time its salvage value will be $7,500. Operating and maintenance expenses are estimated to be $2,000 per year. If the filtration system is not purchased, Aerotron Electronics will have to pay Bay City $12,000 per year for water purification. If the system is purchased, no water purification from Bay City will...
Aerotron Electronics is considering purchasing a water filtration system to assist in circuit board manufacturing. The...
Aerotron Electronics is considering purchasing a water filtration system to assist in circuit board manufacturing. The system costs $40,000. It has an expected life of 7 years, at which time its salvage value will be $7,500. Operating and maintenance expenses are estimated to be $2,000 per year. If the filtration system is not purchased, Aerotron Electronics will have to pay Bay City $12,000 per year for water purification. If the system is purchased, no water purification from Bay City will...
Melbourne Metal is considering becoming a supplier of transmission housings. It would require buying a new...
Melbourne Metal is considering becoming a supplier of transmission housings. It would require buying a new forge that would cost $125,000 (including all setup costs) and is expected to last five years. Let the asset life be the life of the project. Melbourne Metal does a best guess (Base) study of their costs and revenues. They anticipate setting their price at p $50 per unit and they estimate the annual demand is q 2,500 10p. Variable costs (labour, materials, etc.)...
Brooks Clinic is considering investing in new heart-monitoring equipment. It has two options. Option A would...
Brooks Clinic is considering investing in new heart-monitoring equipment. It has two options. Option A would have an initial lower cost but would require a significant expenditure for rebuilding after 4 years. Option B would require no rebuilding expenditure, but its maintenance costs would be higher. Since the Option B machine is of initial higher quality, it is expected to have a salvage value at the end of its useful life. The following estimates were made of the cash flows....
The Balas Manufacturing Company is considering buying an overhead pulley system. The new systern has a...
The Balas Manufacturing Company is considering buying an overhead pulley system. The new systern has a purchase price of $150,000, an estimated useful life and MACRS class life of five years, and an estimated salvage value of $10,000. The system is expected to enable the company to economize on electric power usage, labor, and repair costs, as well as to reduce the number of defective products made. A total annual savings of $95,000 will be realized if the new pulley...
Aerotron Electronics is considering purchasing a water filtration system to assist in circuit board manufacturing. The system costs $40,000. It has an expected life of 7 years at which time its salvage value will be $7,500. Operating and maintenance expenses are estimated to be $2,000 per year. If the filtration system is not purchased, Aerotron Electronics will have to pay Bay City $12,000 per year for water purification. If the system is purchased, no water purification from Bay City will...
Aerotron Electronics is considering the purchase of a water filtration system to assist in circuit board manufacturing. The system costs $40,000. It has an expected life of 7 years at which time its salvage value will be $7,500. Operating and maintenance expenses are estimated to be $2,000 per year. If the filtration system is not purchased, Aerotron Electronics will have to pay Bay City $12,000 per year for water purification. If the system is purchased, no water purification from Bay...
A company is considering buying a new piece of machinery that costs $30,000 and has a salvage value of $8,000 at the end of its 5-year useful life. The machinery nets $5,000 per year in annual revenues. MARR = 8%. The internal rate of return (IRR) on this investment is between A. 2%-3%. B. 11%-12%. C. 6%-7%. D. 13%-14%. E. 4%-5%. Using the information in the previous question #5, if the company considering purchasing the machine uses a MARR of...
Aerotron Electronics is considering purchasing a water filtration system to assist in circuit board manufacturing. The system costs $40,000. It has an expected life of 7 years, at which time its salvage value will be $7,500. Operating and maintenance expenses are estimated to be $2,000 per year. If the filtration system is not purchased, Aerotron Electronics will have to pay Bay City $12,000 per year for water purification. If the system is purchased, no water purification from Bay City will...
Aerotron Electronics is considering purchasing a water filtration system to assist in circuit board manufacturing. The system costs $40,000. It has an expected life of 7 years, at which time its salvage value will be $7,500. Operating and maintenance expenses are estimated to be $2,000 per year. If the filtration system is not purchased, Aerotron Electronics will have to pay Bay City $12,000 per year for water purification. If the system is purchased, no water purification from Bay City will...
Melbourne Metal is considering becoming a supplier of transmission housings. It would require buying a new forge that would cost $125,000 (including all setup costs) and is expected to last five years. Let the asset life be the life of the project. Melbourne Metal does a best guess (Base) study of their costs and revenues. They anticipate setting their price at p $50 per unit and they estimate the annual demand is q 2,500 10p. Variable costs (labour, materials, etc.)...
Brooks Clinic is considering investing in new heart-monitoring equipment. It has two options. Option A would have an initial lower cost but would require a significant expenditure for rebuilding after 4 years. Option B would require no rebuilding expenditure, but its maintenance costs would be higher. Since the Option B machine is of initial higher quality, it is expected to have a salvage value at the end of its useful life. The following estimates were made of the cash flows....
The Balas Manufacturing Company is considering buying an overhead pulley system. The new systern has a purchase price of $150,000, an estimated useful life and MACRS class life of five years, and an estimated salvage value of $10,000. The system is expected to enable the company to economize on electric power usage, labor, and repair costs, as well as to reduce the number of defective products made. A total annual savings of $95,000 will be realized if the new pulley...
Most questions answered within 3 hours.
-
Where is the error in this code sequence?
String s1 = "Hello";
String s2 = "ello";...
asked 10 months ago -
Financial data for Joel de Paris, Inc., for last year
follow:
Joel de Paris, Inc.
Balance...
asked 10 months ago -
Consider this reaction:
Al2(SO4)3 (aq)+ BaCl3
(aq) Al2Cl6 (aq)- +
3BaSO4(s) . What is the...
asked 10 months ago -
Suppose that Savneet is considering increasing her
recent random sample from 20 car rentals to 40...
asked 10 months ago -
Trucks arrive at an unloading terminal at an average rate of 120
per hour.
Trucks arrive...
asked 10 months ago -
Why are methanol and ethanol completely soluble in water while
octanol is not very little soluble....
asked 10 months ago -
A facilities manager at a university reads in a research report
that the mean amount of...
asked 10 months ago -
When the CuSO4 is rehydrated by adding water to the anhydrous
compound, is this an endothermic...
asked 10 months ago -
A ray of sunlight is passing from diamond into crown glass; the
angle of incidence is...
asked 10 months ago -
A block of mass 0.249 kg is placed on top of a light, vertical
spring of...
asked 10 months ago -
how do the kidneys compensate in the presences of acidosis
a) trigger hyperventilate
b) reserve acid...
asked 10 months ago -
Question 501 pts
The rental rate of capital to the firm increases. Which of the
following...
asked 10 months ago