Greengrass Incorporated (GI) is updating its Weed and Grass Chemical Quality control equipment and is considering...
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Greengrass Incorporated (GI) is updating its Weed and Grass Chemical Quality control equipment and is considering the sponsorship of a NASCAR team. As the lead Test Engineering manager, you have to select the best option for the product line control equipment. Your team has researched the market and found four options but only the three below will meet the technical needs of the company. The company as a 6 year contract and needs the equipment for all 6 years. The financial manager has told you that you need to consider a discount rate of 10% to meet company ROI guidelines. You are not given any product profit and quantity information, since that is company confidential and held at very high levels in the company. So you can only make your decision on your cash flow/discount analysis. Based on discussions with senior management in your division, you have decided to use a present-worth criterion to make your recommendation. The options are shown below; pick the best option for the Company and be sure to justify your recommendation. Option Initial Investment Useful Life Salvage Value Annual Maintenance Costs $65,000 $57,500 $120,000 $100,000 $150,000 $10,000 $30,000 4 Years 6 Years N/A---Annual B. Lease Greengrass Incorporated (GI) is updating its Weed and Grass Chemical Quality control equipment and is considering the sponsorship of a NASCAR team. As the lead Test Engineering manager, you have to select the best option for the product line control equipment. Your team has researched the market and found four options but only the three below will meet the technical needs of the company. The company as a 6 year contract and needs the equipment for all 6 years. The financial manager has told you that you need to consider a discount rate of 10% to meet company ROI guidelines. You are not given any product profit and quantity information, since that is company confidential and held at very high levels in the company. So you can only make your decision on your cash flow/discount analysis. Based on discussions with senior management in your division, you have decided to use a present-worth criterion to make your recommendation. The options are shown below; pick the best option for the Company and be sure to justify your recommendation. Option Initial Investment Useful Life Salvage Value Annual Maintenance Costs $65,000 $57,500 $120,000 $100,000 $150,000 $10,000 $30,000 4 Years 6 Years N/A---Annual B. Lease
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Present Worth of Option A 299211 Note 1 Present Worth of Option B 383493 Note 2 Present Worth of Opt... View the full answer
Related Book For
Statistics for Managers Using Microsoft Excel
ISBN: 978-0133130805
7th edition
Authors: David M. Levine, David F. Stephan, Kathryn A. Szabat
Posted Date:
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