X Company is considering producing and selling a new product. After conducting a market research study...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
X Company is considering producing and selling a new product. After conducting a market research study that cost $4,000, company estimates are that sales of the product will be 8,400 units in each of the next four years, contribution margin per unit will be $6.10, and annual fixed costs will be $18,182. In order to produce the new product, additional equipment would have to be purchased, costing $120,000, with no salvage value at the end of four years. What is the internal rate of return of producing and selling this new product? [Submit your rate as a decimal: .XX] One of X Company's production machines was badly damaged recently. Unfortunately, the machine was purchased just three years earlier for $50,000. The company must either repair the machine or purchase a new machine. The estimated cost of repairing the machine is $21,000, after which operating costs will be $65,000 a year. It will also require a maintenance check in the second year that is estimated to cost $3,000. A new machine will cost $80,000, but it will be more efficient than the repaired machine, with annual operating cost savings of $13,000. Both the repaired machine and the new machine will last for five years, at which time the repaired one would be worthless, and new one would be worth $6,500. If it is not repaired, the damaged machine can be sold immediately for $6,000. Assuming a discount rate of 8%, what is the net present value of repairing the damaged machine instead of buying the new machine? [Use the present value tables in the Coursepack.] X Company is considering producing and selling a new product. After conducting a market research study that cost $4,000, company estimates are that sales of the product will be 8,400 units in each of the next four years, contribution margin per unit will be $6.10, and annual fixed costs will be $18,182. In order to produce the new product, additional equipment would have to be purchased, costing $120,000, with no salvage value at the end of four years. What is the internal rate of return of producing and selling this new product? [Submit your rate as a decimal: .XX] One of X Company's production machines was badly damaged recently. Unfortunately, the machine was purchased just three years earlier for $50,000. The company must either repair the machine or purchase a new machine. The estimated cost of repairing the machine is $21,000, after which operating costs will be $65,000 a year. It will also require a maintenance check in the second year that is estimated to cost $3,000. A new machine will cost $80,000, but it will be more efficient than the repaired machine, with annual operating cost savings of $13,000. Both the repaired machine and the new machine will last for five years, at which time the repaired one would be worthless, and new one would be worth $6,500. If it is not repaired, the damaged machine can be sold immediately for $6,000. Assuming a discount rate of 8%, what is the net present value of repairing the damaged machine instead of buying the new machine? [Use the present value tables in the Coursepack.]
Expert Answer:
Answer rating: 100% (QA)
Answer Solution Net annual cash flows 33058 840061018182 ... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
A company is considering creating and selling a new type of cookies. Create a report explaining the research process that should be used by the company to make this decision. Your report should...
-
X Company is considering producing and selling a new product. After conducting a market research study that cost $4,600, company estimates are that sales of the product will be 8,000 units in each of...
-
What does the term contribution margin per unit mean? How is the contribution margin used in cost analysis to support managerial decisions?
-
A teacher has just given an algebra exam. What are some of the statistics she could compute?
-
A firm has common shares outstanding with a discount rate of 12 percent. The current market price is $22.75, and dividend payments for this year are expected to be $0.60. What is the per share...
-
Explain the two systems used by the brain in decision-making.
-
What is the role of cooling towers in surface condenser ?
-
In 2011, Ross Corporation had year-end assets of $550,000, sales $790,000 net income of $90,000, net cash flows from operating activities of $180,000, purchases of plant assets of $120,000 and sales...
-
A n aircraft of weight 3 4 7 0 0 0 N is catapulted off the deck of an aircraft carrier. if the aircraft starts at rest, and reaches a velocity of 7 2 m / s 2 in 2 . 5 seconds, how much force is...
-
The box plot below shows the amount spent for books and supplies per year by students at four year public colleges. a. Estimate the median amount spent. b. Estimate the first and third quartiles for...
-
The expert on behalf of the shareholders used the 2% growth rate. Think about the growing perpetuity formula used in a terminal value: Growing Perpetuity Formula A higher terminal growth rate will...
-
Suspend a wire grill from a refrigerator or an oven from a string, holding the ends of the string to your ears. Let a friend gently stroke the grill with pieces of broom straw and with other objects....
-
The Korvette concept was started and run by one person and his group of friends. How could its failure have been avoided? Was the problem one of strategy (overexpansion), or was it organizational?...
-
Suppose \(\mathbf{x} \sim M N(n, \boldsymbol{\pi})\) follows a multinomial distribution of size \(n\) and probability \(\pi\). Derive the variance matrix of \(\mathbf{x}\).
-
Consider PowerBar, the strategy for which is summarized in the PowerBar case. What implications for the culture, structure, systems, and people would you suggest given the nature of the product and...
-
What performance measure would you consider most important for McDonald's? For Chevrolet?
-
Imagine that you are an HR manager preparing a report for the executive teams annual strategy meeting. Healthcare costs make up roughly 31% of your companys payroll costs. These costs have risen...
-
Ashlee, Hiroki, Kate, and Albee LLC each own a 25 percent interest in Tally Industries LLC, which generates annual gross receipts of over $10 million. Ashlee, Hiroki, and Kate manage the business,...
-
Janelle Heinke, the owner of HaPeppas!, is considering a new oven in which to bake the firms signature dish, vegetarian pizza. Oven type A can handle 20 pizzas an hour. The fixed costs associated...
-
Explain what is meant by the term degeneracy within the context of transportation modeling.
-
Solve the following linear program graphically: Maximize cost = X1 + X2 8X1 + 16X2 64 X1 0 X2 2
-
Do you expect to be able to observe the diffraction of light through \((a)\) the front door to your house; \((b)\) the holes in a button; (c) the gaps between threads of the fabric of an umbrella?
-
Figure 34.21 shows diffracted \(\mathrm{x}\)-ray intensity as a function of the Bragg angle \(\alpha\), obtained using \(\mathrm{x}\) rays having a wavelength of \(0.11 \mathrm{~nm}\). (a) Without...
-
Coherent green light of wavelength \(530 \mathrm{~nm}\) passes through two very narrow slits separated by \(1.00 \mu \mathrm{m}\). What is \((a)\) the angular location of the first-order bright...
Study smarter with the SolutionInn App