Last year, Muskett Inc., which makes nonflammable fireworks, hired an engineering firm to evaluate the technical...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Last year, Muskett Inc., which makes nonflammable fireworks, hired an engineering firm to evaluate the technical capabilities of three different pieces of high-tech equipment that may be used in their manufacturing process. The study cost $300,000 and the results suggested that only the ECU-9 was capable of meeting Muskett's needs. The ECU-9 machine will cost $4 million. The equipment will be depreciated straight-line over 25 years to a salvage value of $400,000 and sold for that amount in 25 years. If purchased the ECU-9 will increase revenues by $2.3 million per year and increase operating cost by $1.5 million per year. The company will increase net working capital by $170,000 at the beginning of the project. This working capital will be liquidated at the end of the project. The marginal tax rate is 25%. The cost of capital is 13.00%. Last year, Muskett Inc., which makes nonflammable fireworks, hired an engineering firm to evaluate the technical capabilities of three different pieces of high-tech equipment that may be used in their manufacturing process. The study cost $300,000 and the results suggested that only the ECU-9 was capable of meeting Muskett's needs. Using the information the initial net cash flow of the project (i.e., CFO) is $ Last year, Muskett Inc., which makes nonflammable fireworks, hired an engineering firm to evaluate the technical capabilities of three different pieces of high-tech equipment that may be used in their manufacturing process. The study cost $300,000 and the results suggested that only the ECU-9 was capable of meeting Muskett's needs. The ECU-9 machine will cost $4 million. The equipment will be depreciated straight-line over 25 years to a salvage value of $400,000 and sold for that amount in 25 years. If purchased the ECU-9 will increase revenues by $2.3 million per year and increase operating cost by $1.5 million per year. The company will increase net working capital by $170,000 at the beginning of the project. This working capital will be liquidated at the end of the project. The marginal tax rate is 25%. The cost of capital is 13.00%. Last year, Muskett Inc., which makes nonflammable fireworks, hired an engineering firm to evaluate the technical capabilities of three different pieces of high-tech equipment that may be used in their manufacturing process. The study cost $300,000 and the results suggested that only the ECU-9 was capable of meeting Muskett's needs. Using the information the initial net cash flow of the project (i.e., CFO) is $
Expert Answer:
Answer rating: 100% (QA)
Amount spent on study cost is sunk cost which is irrelevant in ... View the full answer
Related Book For
Statistics For Business And Economics
ISBN: 9780134506593
13th Edition
Authors: James T. McClave, P. George Benson, Terry Sincich
Posted Date:
Students also viewed these general management questions
-
The anions of phenols (phenoxide ions) may be used in the Williamson ether synthesis, especially with very reactive alkylating reagents such as dimethyl sulfate. Using phenol, dimethyl sulfate, and...
-
Distinguish between the two bases that may be used in estimating uncollectible accounts.
-
Describe five different types of testing that may be used in the selection process and give an example of each.
-
The company of choice is APPLE INC (AAPL). Brief description of the company (one paragraph, briefly summarizing the companys business) Company history (origin, major developments, etc.) Organization...
-
While under contract to play professional basketball for the Philadelphia 76ers, Billy Cunningham negotiated a three-year contract with the Carolina Cougars, another professional basketball team. The...
-
Y = 4x 2 Determine the slope and the y-intercept. Then use the slope and the y-intercept to graph the equation by hand.
-
What are some typical consumer complaints?
-
Jamie Wong is considering building an investment portfolio containing two stocks, L and M. Stock L will represent 40% of the dollar value of the portfolio, and stock M will account for the other 60%....
-
I would like to know how to prepare classified balance sheet at December 31, 2019 if the notes payable has a stated interest rate of 6% and the principle and interest rate are due on November 16, 2021
-
The state of Kentucky filed a tax lien against Panbowl Energy, claiming unpaid taxes. Six months later, Panbowl bought a powerful drill from Whayne Supply, making a down payment of $11,500 and...
-
Thomas has been dependent on caregivers for a very long time and always complies with authority figures without question. What approach should a staff member take to support him? Develop shorter,...
-
QUESTION ONE. a)Validity and reliability reflect the quality of the research design.Define Validity and Reliability and explain the types of errors that may affect validity and reliability of a...
-
What are some of the PERSONAL uses of life insurance? Locate a resource that gives advice for how much life insurance to own and report on what you learned. Briefly advise which form of life...
-
Common stock value-Constant growth McCracken Roofing, Inc., common stock paid a dividend of $1.11 per share last year. The company expects earnings and dividends to grow at a rate of 4% per year for...
-
a) Financial institutions in Malaysia face different types of risks. Briefly explain THREE (3) risks common to financial institutions. b) Fed (Bank Negara Malaysia) uses THREE (3) tools to control...
-
K Given that x has a Poisson distribution with u=3, what is the probability that x=1? P(1) (Round to four decimal places as needed.)
-
We often consciously or unconsciously promote stereotypes about personality disorders during casual conversations. Consider the language used within your own culture (e.g., family members, friends,...
-
Marc Company assembles products from a group of interconnecting parts. The company produces some of the parts and buys some from outside vendors. The vendor for Part X has just increased its price by...
-
Refer to the College Choice 2015 Rankings of National Research Universities, Exercise 2.110. Data on academic reputation scores for the top 50 research universities (saved in the file) are listed in...
-
According to the Nuclear Energy Institute (NEI), there were 62 nuclear power plants operating in the United States in 2015. The table at top of the next column lists the 30 states that operate...
-
Refer to The Journal of Finance (December 2011) study of whether the decision to invest in the stock market is dependent on IQ, Exercise 3.46 (p. 158). The researchers found that the probability of a...
-
The question is the same as in problem 5 , but now the simple implicit scheme (6.34) is used. Consider two situations. a) The expected error must be less than \(\sim 10^{-4}\) for the entire...
-
Compare the schemes introduced for the linear convection equation. a) Simple explicit schemes (7.6), (7.7), and (7.8) b) Simple implicit scheme (7.19) c) Leapfrog scheme (7.21) d) Lax-Wendroff scheme...
-
Repeat Problem 7.1 for the following schemes applied to the one-dimensional heat equation. a) Simple explicit scheme \((7.28)\) b) Simple implicit scheme \((7.32)\) c) Crank-Nicolson scheme (7.34)...
Study smarter with the SolutionInn App