1. You supervise an aging production line that constantly needs maintenance and new parts. Last month...

1. You supervise an aging production line that constantly needs maintenance and new parts. Last month you spent $25,000 replacing a failed controller. Should the following plan be accepted if the interest rate is 15%? The net installed cost of the new line to replace the old line is $600,000 with a useful life of six years. In the first year its operating cost will be $100,000, and it will generate annual revenues of $300,000. Each year the operating cost will increase by $5,000 and the revenues will fall by $15,000. After six years the equipment will have a value of $100,000 in the next re-building of the line.

Solutions

Expert Solution

The Plan of new installation can be accepted because it is having a posetive Net present worth.

Please don't forget to rate the answer if its helpful, thank you.

Rahul Sunny answered 1 month ago

Next > < Previous

Related Solutions

You supervise an aging production line that constantly needs maintenance and new parts. Last month you...

You supervise an aging production line that constantly needs maintenance and new parts. Last month you spent $25,000 replacing a failed controller. Should the following plan be accepted if the interest rate is 15%? The net installed cost of the new line to replace the old line is $600,000 with a useful life of six years. In the first year its operating cost will be $100,000, and it will generate annual revenues of $300,000.

Parts are inspected on a production line for a defect. It is known that 5% of...

Parts are inspected on a production line for a defect. It is known that 5% of the pieces have this defect. (this applies to 5 parts of the problem) a. If an inspector examines 12 parts, what is the probability of finding more than 2 defective parts? b. What is the expected number of defective parts in 12-piece sample? C. In another area, parts are inspected until 5 defective parts are found, then the machine is stopped to reset the...

Parts are inspected on a production line for a defect. It is known that 5% of...

Parts are inspected on a production line for a defect. It is known that 5% of the pieces have this defect. (this applies to 5 parts of the problem) to. If an inspector examines 12 parts, what is the probability of finding more than 2 defective parts? (10 pts) b. What is the expected number of defective parts in 12-piece sample? (10 pts) c. In another area, parts are inspected until 5 defective parts are found, then the machine is...

A manufacturer offers a 36-month warranty on a new line of its products. Production engineers believe...

A manufacturer offers a 36-month warranty on a new line of its products. Production engineers believe the lifetime, Y, of any randomly selected item from this new line has a normal distribution with mean µ = 45 and standard deviation σ = 7. Accordingly, the probability an item fails within the first 36 months after purchase is Thus, under typical conditions only about 10% of the items will fail early, and, since this percentage is so low, managers and marketers...

Nobel Tech Inc. is building a new production line. The cost of the production line is...

Nobel Tech Inc. is building a new production line. The cost of the production line is $3 million in the current year and $2 million in the following year. The production line is expected to bring in cash inflow of $1.6 million in year 2, and $2 million each year from year 3 to year 7. The company uses a cost of capital of 10% on all the projects. The IRR of the project is closest to ___________. Group of...

Nobel Tech Inc. is building a new production line. The cost of the production line is...

Nobel Tech Inc. is building a new production line. The cost of the production line is $3 million in the current year and $2 million in the following year. The production line is expected to bring in cash inflows of $1.6 million in year 2, and $2 million each year from year 3 to year 7. The company uses a cost of capital of 10% on all the projects. The discounted payback period of this project is ____________. Group of...

The following information is available for a company’s maintenance cost over the last seven months. Month...

The following information is available for a company’s maintenance cost over the last seven months. Month Maintenance Hours Maintenance Cost June 11 $ 5,050 July 17 6,850 August 13 5,650 September 16 6,550 October 22 8,350 November 25 9,250 December 7 3,850 Using the high-low method, estimate both the fixed and variable components of its maintenance cost. High-Low method - Calculation of variable cost per maintenance hour Change in cost Cost at high point minus cost at low point Variable...

The following information is available for a company’s maintenance cost over the last seven months. Month...

The following information is available for a company’s maintenance cost over the last seven months. Month Maintenance Hours Maintenance Cost June 10 $ 3,950 July 19 5,390 August 11 4,110 September 14 4,590 October 20 5,550 November 23 6,030 December 5 3,150 Using the high-low method, estimate both the fixed and variable components of its maintenance cost. High-Low method - Calculation of variable cost per maintenance hour Total cost at the high point Variable costs at the high point:...

The following information is available for a company’s maintenance cost over the last seven months. Month...

The following information is available for a company’s maintenance cost over the last seven months. Month Maintenance Hours Maintenance Cost June 9 $ 3,950 July 18 5,750 August 12 4,550 September 15 5,150 October 21 6,350 November 24 6,950 December 6 3,350 Using the high-low method, estimate both the fixed and variable components of its maintenance cost. High- Low method calculation of variable cost per maintenance hour __________________ ____________________ ____________ _______________ __________0 _________________ ____________________ _______________ Total cost at the high...

1. Mighty Manufacturing is considering investing $600,000 in a new production line. The new equipment is...

1. Mighty Manufacturing is considering investing $600,000 in a new production line. The new equipment is expected to generate a savings of $200,000 per year for each of the next five years. Mighty’s cost of capital is 5 percent. What is the net present value of the investment in the new production line? Disregard the effect of depreciation and taxes. A. $565,880. B. $456,980. C. $265,880. D. $650,490. 2. Parts Equipment Company is evaluating a plan to refit its machinery....

Subjects