FastBits Electronic Company Sdn. Bhd. is evaluating new precision inspection devices to help verify package quality....
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
FastBits Electronic Company Sdn. Bhd. is evaluating new precision inspection devices to help verify package quality. The manager has obtained the following bids from four companies. All devices have a life of five years and a minimum attractive rate of return of 6%. The alternatives are mutually exclusive. Description Initial Cost (RM) Company A Company B Company C Company D 400000 113000 490000 200000 12000 23000 9000 Annual Costs (RM) 900 Net Cash Flows (RM) 100000 31640 122500 46000 7.9% 12.4% 7.9% IRR Determine the annual benefits of the devices from all four companies. Company A: Company B: Company C: Company D: Device from which company has the highest annual benefit? FastBits should reject the bid from which company based on the given individual IRR? Using incremental internal rate of return analysis, from which company, if any, should the manager purchase the new precision inspection device? Use trial and error method with 6% and 12% interest rates. Understood? (Y/N) Step 1- Eliminate Company Step 2-Rank Company from Step 4 - Incremental IRR first comparison Step 5 - Remove Company from selection Repeat Step 4 - Incremental IRR 2nd comparison Step 5 - Choose Company Demonstrate that the same company selection would be made with proper application of the Present Worth (PW) method. PW Company A PW Company B PW Company C PW Company D 4.8% Format: 400200 Format : 46980 Format: 584400 Format : 67000 Format : A Format : A Format : A Format : A Format : X-X-x Format : 5.6 1-2-3 Format : A Format : 8.9 Format : A Format : 79540 Format : 40230 Format : 24086 Format : -5420 Thus, choose Company Tormot: A FastBits Electronic Company Sdn. Bhd. is evaluating new precision inspection devices to help verify package quality. The manager has obtained the following bids from four companies. All devices have a life of five years and a minimum attractive rate of return of 6%. The alternatives are mutually exclusive. Description Initial Cost (RM) Company A Company B Company C Company D 400000 113000 490000 200000 12000 23000 9000 Annual Costs (RM) 900 Net Cash Flows (RM) 100000 31640 122500 46000 7.9% 12.4% 7.9% IRR Determine the annual benefits of the devices from all four companies. Company A: Company B: Company C: Company D: Device from which company has the highest annual benefit? FastBits should reject the bid from which company based on the given individual IRR? Using incremental internal rate of return analysis, from which company, if any, should the manager purchase the new precision inspection device? Use trial and error method with 6% and 12% interest rates. Understood? (Y/N) Step 1- Eliminate Company Step 2-Rank Company from Step 4 - Incremental IRR first comparison Step 5 - Remove Company from selection Repeat Step 4 - Incremental IRR 2nd comparison Step 5 - Choose Company Demonstrate that the same company selection would be made with proper application of the Present Worth (PW) method. PW Company A PW Company B PW Company C PW Company D 4.8% Format: 400200 Format : 46980 Format: 584400 Format : 67000 Format : A Format : A Format : A Format : A Format : X-X-x Format : 5.6 1-2-3 Format : A Format : 8.9 Format : A Format : 79540 Format : 40230 Format : 24086 Format : -5420 Thus, choose Company Tormot: A
Expert Answer:
Answer rating: 100% (QA)
Net cash flow Annual benefits Annual Cost Hence Annual benefit Net cash flow Annual cost The net cas... View the full answer
Related Book For
Business Statistics
ISBN: 978-0321925831
3rd edition
Authors: Norean Sharpe, Richard Veaux, Paul Velleman
Posted Date:
Students also viewed these accounting questions
-
A special industrial battery must have a life of at least 400 hours. A hypothesis test is to be conducted with a .02 level of significance. If the batteries from a particular production run have an...
-
A project has a service life of five years with the initial investment outlay of $200,000. If the discounted payback period occurs at the end of the project service life (say five years) at an...
-
Low-energy lightbulbs cost $3.50, have a life of nine years, and use about $1.60 of electricity a year. Conventional lightbulbs cost only $.50, but last only about a year and use about $6.60 of...
-
Litchfield Industries gathered the following information for the month ended June 31: The static budget volume is 5000 units: Overhead flexible budget: Number of units 8,000 9,000 10,000 Standard...
-
Describe the two approaches to rate regulation in insurance.
-
Erna Smith, a portfolio manager, has two fixed-rate bonds in her portfolio: a callable bond (Bond X) and a putable bond (Bond Y). She wants to examine the interest rate sensitivity of these two bonds...
-
Is a winwin situation the only practical way to move business towards sustainability?
-
Joan Ziemba owns a small variety store. The following transactions took place during March of the current year. Journalize the transactions in a general journal using the perpetual inventory method....
-
Describe a stressful situation you dealt with in past. What was the situation and how did you deal with it. What were your stressors? What was the outcome? positive or negative?
-
Kepler's second law states that as a planet moves around in its orbit, it sweeps out equal areas in equal times. Examine the following figure, which shows a planet (blue dot, labeled "E"), orbiting...
-
Branding and Price Questions Explain what the video has to say about Brands. What does he say is the value of the Brand? What can you do with price whenyou have great Brand? What does he mean by...
-
What are the basic similarities and differences between statistical and non-statistical sampling?
-
Discuss the main risks associated with EDI systems.
-
Identify the key words and phrases in the auditors report that describe the character of the audit.
-
What is microcomputer-based audit software? Identify the common applications of this software.
-
Using the EEO-1 report as an example, discuss the purpose of government mandates. Give examples of penalties that organizations incur when they fail to comply with government mandates such as EEO and...
-
Find the first and second derivative of the function. G(r)=r 1 G'(r) + == 2T 6,5 G"(r) = Need Help? Watch It
-
Willingness to pay as a measure of a person's value for a particular good measures the maximum a person would be willing to pay requires that payment actually be made depends on the satisfaction that...
-
The American Red Cross must track their supply and demand for various blood types. They estimate that about 45% of the U.S. population has Type O blood, 40% Type A, 11 % Type B, and the rest Type AB-...
-
For which one of the following situations would a Kruskal Wallace test be appropriate? a) Comparing the ratings of a new product on a 5-point Likert scale by a panel of consumers to their ratings of...
-
In a random survey of 226 self-employed individuals, 20 reported having had their tax returns audited by the IRS in the past year. Estimate the proportion of self- employed individuals nationwide...
-
Discuss the three general roles of management. What are the purposes of these roles? What specific roles fall under each general role?
-
Describe the steps in management decision making. What are the difficulties in making management decisions?
-
What are the four functions of management? How are they related to the work process?
Study smarter with the SolutionInn App