Before the company is put up for sale, Gardenia plans to invest ina new production robot,...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Before the company is put up for sale, Gardenia plans to invest ina new production robot, which can perform several production processes. The aim is to achieve cost reductions through lower wage costs. 1 For that purpose, Gardenia has hired a consultancy firm to analyse which production processes that can be automated. The consultancy firm has also done research on the market for production robots and has recommended a specific production robot that suits the needs of Gardenia. The consultancy firm has charged a fee of 200,000 DKK for its services, which shall be payed within 3 months. The recommended production robot has a cash price of 2,000,000 DKK and an optimal lifetime of 6 years. After 6 years it will have an expected scrap value of 200,000 DKK. Based on an analysis related to the operation costs The hourly wage is 200 DKK. sts then following information has been estimated. Saving of labour hours yearly, 1,250., holiday benefits, pension and administration cost is 40 pct. On top of that. Savings in time for maintenance and parts are estimated to have a value of 100,000 DKK per year. The company normally uses a discount rate of 10%. Before any calculations have been made, there is controversy in the financial department over whether the included in the analysis An employ ee argues that because the fee is directly caused by this project, it 3.1 Read the above description.caredly and identify which payments are of any relevance to the investment decision. Create a schedule showing the payments for each year and calculate the investment's NPV. (Tables with discount factors are available to you -see next page) 3.2 Decide whether the company should go ahead and invest in the new robot. if you did not complete question 3.1. just explain how you would conclude in this regard? 3.3 Discuss and briefly explain the connection between the RRR(required rate of return), the NPV (net present value) and the IRR (internal rate of return). 3.4 Based on the calculation take a discussion of the inmvestment in the new robot. What are the consequences for the company if they decide to invest in the robot? Focus Table data for Question 3 (choose the necessary data from the relevant table) Interest table showing the future value in period t of DKK 1,- paid today that is: (1+r) 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 13% 14% 12% 1,12 1,13 1,14 1,01 1,05 1,06 1,07 1,08 1,09 1,10 11% 1,11 1,23 1,25 1,28 1,30 1,02 1,03 1,04 1,04 1,06 1,08 1,02 1,10 1,12 1,14 1,17 1,19 1,21 1,48 1,69 1,75 1,93 2,01 2,31 2,35 2,66 2,66 2,85 3,06 3 1,03 1,06 1,09 1,12 1,16 1,19 1,23 1,26 1,30 1,33 1,37 1,40 1,44 4 1,04 1,08 1,13 1,17 1,22 1,26 1,31 1,36 1,41 1,46 1,52 1,57 1,63 5 1,05 1,10 1,16 1,22 1,28 1,34 1,40 1,47 1,54 1,61 1,69 1,76 1,84 6 1,06 1,13 1,19 1,27 1,34 1,42 1,50 1,59 1,68 1,77 1,87 1,97 2,08 2,19 7 1,07 1,15 1,23 1,32 1,41 1,50 1,61 1,71 1,83 1,95 2,08 2,21 2,50 8 1,08 1,17 1,27 1,37 1,48 1,59 1,72 1,85 1,99 2,14 2,30 2,48 9 1,09 1,20 1,30 1,42 1,55 1,69 1,84 2,00 2,17 2,36 2,56 10 1,10 1,22 1,34 1,48 1,63 1,79 1,97 2,16 2,37 2,59 2,84 11 1,12 1,24 1,38 1,54 1,71 1,90 2,10 2,33 2,58 2,85 3,15 12 1,13 1,27 1,43 1,60 1,80 2,01 2,25 2,52 2,81 3,14 3,50 3,90 4,33 4,82 13 1,14 1,29 1,47 1,67 1,89 2,13 2,41 2,72 3,07 3,45 3,88 4,36 4,90 5.49 14 1,15 1,32 1,51 1,73 1,98 2,26 2,58 2,94 3,34 3,80 4,31 4,89 5,53 6,26 7,08 15 1,16 1.35 1,56 1,80 2,08 2,40 2,76 3,17 3,64 4,18 4,78 5.47 2,77 3,00 3.25 3,52 3,11 3,39 3,71 4,05 3,48 3,84 4,23 4,65 5,35 6,15 6.25 7.14 8,14 t: 1 2 5% 6% 7% Interest table showing the present value of DKK 1,- paid at the end of period t 1% 2% 3% 4% 8% 9% 0,99 0,98 0,97 0,96 0,95 0,94 0,93 0,93 0,92 0,89 0,87 0,86 0,84 0,82 0,79 0,77 0,98 0,97 0,96 0,94 0,92 0,91 0,94 0,92 0,89 0,86 0,92 0,89 0,85 0,84 0,96 0,82 0,79 0,76 0,74 0,71 0,78 0,75 0,71 0,68 0,65 0,75 0,70 0,67 7 0,62 8 0,58 0,95 0,91 0,86 0,82 0,94 0,89 0,84 0,79 0,93 0,87 0,81 0,76 0,71 0,67 0,92 0,85 0,79 0,73 0,68 0,63 9 0,91 0,84 0,77 0,70 0,64 0,59 0,82 0.74 0,68 0,61 0,56 0,51 0,65 0,58 0,53 0,48 0,62 0,56 0,50 0,44 0,40 0,36 0,54 0,50 10 0,91 0,42 0,46 0,43 0.39 11 0,90 0,80 0,72 12 0,89 0,79 0,70 13 0,88 0,77 0.68 0,60 0,53 0,47 0,41 0,37 0,33 14 0,87 0,76 0,66 0,58 0,51 0,44 0,39 0,34 0,30 15 0,86 0.74 0,64 0,56 0.48 0.42 0,36 0,32 0,27 t: 1 2 3 4 5 6 0,63 0,60 0,56 0,58 0,54 0,55 0,51 0,48 0,47 0,43 0,42 0,50 0,46 15% that is: (1+r) 10% 11% 12% 13% 14% 15% 0,91 0,90 0,89 0,88 0,88 0,87 0,83 0,81 0,80 0,78 0,77 0,76 0,75 0,73 0,71 0,69 0,67 0,68 0,66 0,64 0,61 0,59 0,62 0,59 0,53 0,66 0.57 0,57 0,54 0,52 0,50 0,51 0,46 0,43 0,45 0,40 0,38 0,40 0,38 0,35 0.33 0,39 0,36 0,33 0,31 0,28 0,39 0,35 0,32 0,29 0,27 0.25 0,29 0,26 0,24 0,21 0,26 0,23 0,21 0,19 0,35 0,32 0,32 0,29 0,29 0,26 0,23 0,20 0,18 0,16 0,26 0,23 0,20 0,18 0,16 0,14 0,24 0.21 0.18 0.16 0.14 0.12 0,48 0,43 1,15 1,32 1,52 Before the company is put up for sale, Gardenia plans to invest ina new production robot, which can perform several production processes. The aim is to achieve cost reductions through lower wage costs. 1 For that purpose, Gardenia has hired a consultancy firm to analyse which production processes that can be automated. The consultancy firm has also done research on the market for production robots and has recommended a specific production robot that suits the needs of Gardenia. The consultancy firm has charged a fee of 200,000 DKK for its services, which shall be payed within 3 months. The recommended production robot has a cash price of 2,000,000 DKK and an optimal lifetime of 6 years. After 6 years it will have an expected scrap value of 200,000 DKK. Based on an analysis related to the operation costs The hourly wage is 200 DKK. sts then following information has been estimated. Saving of labour hours yearly, 1,250., holiday benefits, pension and administration cost is 40 pct. On top of that. Savings in time for maintenance and parts are estimated to have a value of 100,000 DKK per year. The company normally uses a discount rate of 10%. Before any calculations have been made, there is controversy in the financial department over whether the included in the analysis An employ ee argues that because the fee is directly caused by this project, it 3.1 Read the above description.caredly and identify which payments are of any relevance to the investment decision. Create a schedule showing the payments for each year and calculate the investment's NPV. (Tables with discount factors are available to you -see next page) 3.2 Decide whether the company should go ahead and invest in the new robot. if you did not complete question 3.1. just explain how you would conclude in this regard? 3.3 Discuss and briefly explain the connection between the RRR(required rate of return), the NPV (net present value) and the IRR (internal rate of return). 3.4 Based on the calculation take a discussion of the inmvestment in the new robot. What are the consequences for the company if they decide to invest in the robot? Focus Table data for Question 3 (choose the necessary data from the relevant table) Interest table showing the future value in period t of DKK 1,- paid today that is: (1+r) 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 13% 14% 12% 1,12 1,13 1,14 1,01 1,05 1,06 1,07 1,08 1,09 1,10 11% 1,11 1,23 1,25 1,28 1,30 1,02 1,03 1,04 1,04 1,06 1,08 1,02 1,10 1,12 1,14 1,17 1,19 1,21 1,48 1,69 1,75 1,93 2,01 2,31 2,35 2,66 2,66 2,85 3,06 3 1,03 1,06 1,09 1,12 1,16 1,19 1,23 1,26 1,30 1,33 1,37 1,40 1,44 4 1,04 1,08 1,13 1,17 1,22 1,26 1,31 1,36 1,41 1,46 1,52 1,57 1,63 5 1,05 1,10 1,16 1,22 1,28 1,34 1,40 1,47 1,54 1,61 1,69 1,76 1,84 6 1,06 1,13 1,19 1,27 1,34 1,42 1,50 1,59 1,68 1,77 1,87 1,97 2,08 2,19 7 1,07 1,15 1,23 1,32 1,41 1,50 1,61 1,71 1,83 1,95 2,08 2,21 2,50 8 1,08 1,17 1,27 1,37 1,48 1,59 1,72 1,85 1,99 2,14 2,30 2,48 9 1,09 1,20 1,30 1,42 1,55 1,69 1,84 2,00 2,17 2,36 2,56 10 1,10 1,22 1,34 1,48 1,63 1,79 1,97 2,16 2,37 2,59 2,84 11 1,12 1,24 1,38 1,54 1,71 1,90 2,10 2,33 2,58 2,85 3,15 12 1,13 1,27 1,43 1,60 1,80 2,01 2,25 2,52 2,81 3,14 3,50 3,90 4,33 4,82 13 1,14 1,29 1,47 1,67 1,89 2,13 2,41 2,72 3,07 3,45 3,88 4,36 4,90 5.49 14 1,15 1,32 1,51 1,73 1,98 2,26 2,58 2,94 3,34 3,80 4,31 4,89 5,53 6,26 7,08 15 1,16 1.35 1,56 1,80 2,08 2,40 2,76 3,17 3,64 4,18 4,78 5.47 2,77 3,00 3.25 3,52 3,11 3,39 3,71 4,05 3,48 3,84 4,23 4,65 5,35 6,15 6.25 7.14 8,14 t: 1 2 5% 6% 7% Interest table showing the present value of DKK 1,- paid at the end of period t 1% 2% 3% 4% 8% 9% 0,99 0,98 0,97 0,96 0,95 0,94 0,93 0,93 0,92 0,89 0,87 0,86 0,84 0,82 0,79 0,77 0,98 0,97 0,96 0,94 0,92 0,91 0,94 0,92 0,89 0,86 0,92 0,89 0,85 0,84 0,96 0,82 0,79 0,76 0,74 0,71 0,78 0,75 0,71 0,68 0,65 0,75 0,70 0,67 7 0,62 8 0,58 0,95 0,91 0,86 0,82 0,94 0,89 0,84 0,79 0,93 0,87 0,81 0,76 0,71 0,67 0,92 0,85 0,79 0,73 0,68 0,63 9 0,91 0,84 0,77 0,70 0,64 0,59 0,82 0.74 0,68 0,61 0,56 0,51 0,65 0,58 0,53 0,48 0,62 0,56 0,50 0,44 0,40 0,36 0,54 0,50 10 0,91 0,42 0,46 0,43 0.39 11 0,90 0,80 0,72 12 0,89 0,79 0,70 13 0,88 0,77 0.68 0,60 0,53 0,47 0,41 0,37 0,33 14 0,87 0,76 0,66 0,58 0,51 0,44 0,39 0,34 0,30 15 0,86 0.74 0,64 0,56 0.48 0.42 0,36 0,32 0,27 t: 1 2 3 4 5 6 0,63 0,60 0,56 0,58 0,54 0,55 0,51 0,48 0,47 0,43 0,42 0,50 0,46 15% that is: (1+r) 10% 11% 12% 13% 14% 15% 0,91 0,90 0,89 0,88 0,88 0,87 0,83 0,81 0,80 0,78 0,77 0,76 0,75 0,73 0,71 0,69 0,67 0,68 0,66 0,64 0,61 0,59 0,62 0,59 0,53 0,66 0.57 0,57 0,54 0,52 0,50 0,51 0,46 0,43 0,45 0,40 0,38 0,40 0,38 0,35 0.33 0,39 0,36 0,33 0,31 0,28 0,39 0,35 0,32 0,29 0,27 0.25 0,29 0,26 0,24 0,21 0,26 0,23 0,21 0,19 0,35 0,32 0,32 0,29 0,29 0,26 0,23 0,20 0,18 0,16 0,26 0,23 0,20 0,18 0,16 0,14 0,24 0.21 0.18 0.16 0.14 0.12 0,48 0,43 1,15 1,32 1,52
Expert Answer:
Answer rating: 100% (QA)
31Year 0 2200000 Year 1 200000 Year 2 200000 Year 3 200000 Year 4 100000 Year 5 100000 Year 6 100000 NPV 1700000 32 From the information given it seem... View the full answer
Related Book For
Quantitative Investment Analysis
ISBN: 978-1119104223
3rd edition
Authors: Richard A. DeFusco, Dennis W. McLeavey, Jerald E. Pinto, David E. Runkle
Posted Date:
Students also viewed these accounting questions
-
A bank pays a stated annual interest rate of 8 percent. What is the effective annual rate using the following types of compounding? A. Quarterly. B. Monthly. C. Continuous.
-
A 30-year mortgage has an annual interest rate of 7.18 percent and a loan amount of $180,000. What are the monthly mortgage payments?
-
A 30-year mortgage has an annual interest rate of 6.84 percent and a loan amount of $250,000. What are the interest and principal for the 120th payment?
-
Henries Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $137,320, including freight and installation. Henries estimated the new...
-
Identify two statistical inferences mentioned in Example 7.1.3.
-
Read the article by McKenna (2012), Social Media's Phony Accounting, and answer the following questions: The author believes there are independence issues with the auditors in this case with Ernst...
-
The chemical potential of a pure substance is equal to the (a) Specific Gibbs' free energy (b) Molar entropy (c) The Gibbs' free energy (d) Molar Gibbs' free energy.
-
1. What type of credit user is Garth? Based on your answer, what is the number one factor that should influence Garth's choice of a credit card? 2. Lindsey insisted that Garth request a free credit...
-
Nicholas Technologies operates two divisions: Hardware Services and Software Services. During the current month, the two divisions reported the following results. Sales Hardware $ 650,000 Software...
-
1 Alta Electronics 2 3 4 5 Solution value 6 Selling price per unit 7 Material cost per unit 8 Labor cost per unit 15 9 Profit 10 Constraints 10 Cor 11 Department 1 Dep 12 Department 2 13 Department 3...
-
Which type of accounting information is indented to satisfy the needs of external users of accounting information?
-
ABC company sold 7 0 0 0 0 0 0 of 5 % bonds on August 1 , 2 0 2 4 . That is a total of 7 9 5 7 4 4 2 when the market rate was at 4 % The bonds were dated August 1 , 2 0 2 4 and pay interest twice a...
-
What is it called when each business if accounted for separately from its owner or owners?
-
Following is financial information from Jensen & Jensen for the fiscal year end. Prepare the fiscal - year retained earnings reconciliation for Jensen & Jensen ( $ millions ) . ( $ millions )...
-
Define a Lease and what 3 aspects need to be considered before a contract can be considered to be a lease. QUESTION 2 Provide a journal of the lease expense for the period ended 3 1 December 2 0 2...
-
On April 1 , 2 0 2 2 , a tenant in an apartment building owned by the company paid $ 9 , 6 0 0 , which represents rent for 6 months in advance. The amount received was credited to the Unearned Rent...
-
2) Two co-axial shafts transmit 40 kW of power at a rotational speed of 1500 revolutions per minute. Coupling and decoupling of the shafts is done by a clutch with friction pads of inner and outer...
-
How many years will it take a $700 balance to grow into $900 in an account earning 5%?
-
Table 7 following shows the autocorrelations of the residuals from an AR(1) model fit to the changes in the gross profit margin (GPM) of The Home Depot, Inc. TABLE 7 Autocorrelations of the Residuals...
-
Last year the return on Harry Company stock was 5 percent. The portion of the return on the stock not explained by a two-factor macroeconomic factor model was 3 percent. Using the data given below,...
-
You are analyzing the last five years of earnings per share data for a company. The figures are $4.00, $4.50, $5.00, $6.00, and $7.00. At what compound annual rate did EPS grow during these years?
-
Acrylic latex paint can be described as a Bingham plastic with a yield stress of $200 \mathrm{dyn} / \mathrm{cm}^{2}$, a limiting viscosity of $50 \mathrm{cP}$, and a density of $0.95 \mathrm{~g} /...
-
A slider bearing can be described as one plate moving with a velocity $V$ parallel to a stationary plate, with a viscous lubricant in between the plates. The force applied to the moving plate is $F$,...
-
Consider a fluid flowing in a conical section, as illustrated in Figure P5.75. The mass flow rate is the same going in (through point 1) as it is coming out (point 2), but the velocity changes...
Study smarter with the SolutionInn App