Question
In: Finance
Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheap...
Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheap purification system for $10 million. The system will last 5 years. Do-It-Right sells a sturdier but more expensive system for $16 million; it will last for 8 years. Both systems entail $1 million in operating costs; both will be depreciated straight-line to a final value of zero over their useful lives; neither will have any salvage value at the end of its life. The firm’s tax rate is 30%, and the discount rate is 15%. Either machine will be replaced at the end of its life.
a. What is the equivalent annual cost of investing in the cheap system? (Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in millions rounded to 2 decimal places.)
b. What is the equivalent annual cost of investing in the more expensive system? (Do not round intermediate calculations. Enter your answer as a positive value. Enter your answer in millions rounded to 2 decimal places.)
Solutions
jeff jeffy answered 3 hours agoRelated Solutions
Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheap...
Blooper Industries must replace its magnoosium purification
system. Quick & Dirty Systems sells a relatively cheap
purification system for $10 million. The system will last 5 years.
Do-It-Right sells a sturdier but more expensive system for $16
million; it will last for 8 years. Both systems entail $1 million
in operating costs; both will be depreciated straight-line to a
final value of zero over their useful lives; neither will have any
salvage value at the end of its life. The...
Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheap...
Blooper Industries must replace its magnoosium purification
system. Quick & Dirty Systems sells a relatively cheap
purification system for $10 million. The system will last 5 years.
Do-It-Right sells a sturdier but more expensive system for $12
million, it will last for 8years. Both systems entail $1 million in
operating costs; both will be depreciated in an asset class that
has a CCA rate of 30%; neither will have any salvage value at the
end of its life. The firm's...
Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheap...
Blooper Industries must replace its magnoosium purification
system. Quick & Dirty Systems sells a relatively cheap
purification system for $12 million. The system will last 4 years.
Do-It-Right sells a sturdier but more expensive system for $13
million; it will last for 5 years. Both systems entail $2 million
in operating costs; both will be depreciated straight-line to a
final value of zero over their useful lives; neither will have any
salvage value at the end of its life. The...
Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheap...
Blooper Industries must replace its magnoosium purification
system. Quick & Dirty Systems sells a relatively cheap
purification system for $10 million. The system will last 5 years.
Do-It-Right sells a sturdier but more expensive system for $16
million; it will last for 8 years. Both systems entail $1 million
in operating costs; both will be depreciated straight-line to a
final value of zero over their useful lives; neither will have any
salvage value at the end of its life. The...
Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheap...
Blooper Industries must replace its magnoosium purification
system. Quick & Dirty Systems sells a relatively cheap
purification system for $10 million. The system will last 5 years.
Do-It-Right sells a sturdier but more expensive system for $12
million; it will last for 6 years. Both systems entail $3 million
in operating costs; both will be depreciated straight-line to a
final value of zero over their useful lives; neither will have any
salvage value at the end of its life. The...
Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheap...
Blooper Industries must replace its magnoosium purification
system. Quick & Dirty Systems sells a relatively cheap
purification system for $12 million. The system will last 4 years.
Do-It-Right sells a sturdier but more expensive system for $13
million; it will last for 5 years. Both systems entail $2 million
in operating costs; both will be depreciated straight-line to a
final value of zero over their useful lives; neither will have any
salvage value at the end of its life. The...
Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheap...
Blooper Industries must replace its magnoosium purification
system. Quick & Dirty Systems sells a relatively cheap
purification system for $12 million. The system will last 6 years.
Do-It-Right sells a sturdier but more expensive system for $20
million; it will last for 8 years. Both systems entail $1 million
in operating costs; both will be depreciated straight-line to a
final value of zero over their useful lives; neither will have any
salvage value at the end of its life. The...
Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheap...
Blooper Industries must replace its magnoosium purification
system. Quick & Dirty Systems sells a relatively cheap
purification system for $10 million. The system will last 5 years.
Do-It-Right sells a sturdier but more expensive system for $16
million; it will last for 8 years. Both systems entail $1 million
in operating costs; both will be depreciated straight-line to a
final value of zero over their useful lives; neither will have any
salvage value at the end of its life. The...
Woodland Industries manufactures and sells custom-made windows. Its job costing system was designed using an activity-based...
Woodland Industries manufactures and sells custom-made windows.
Its job costing system was designed using an activity-based costing
approach. Direct materials and direct labor costs are accumulated
separately, along with information concerning three manufacturing
overhead cost drivers (activities). Assume that the direct labor
rate is $14 per hour and that there were no beginning inventories.
The following information was available for 2016, based on an
expected production level of 45,700 units for the year, which will
require 219,000 direct labor hours:...
Woodland Industries manufactures and sells custom-made windows. Its job costing system was designed using an activity-based...
Woodland Industries manufactures and sells custom-made windows.
Its job costing system was designed using an activity-based costing
approach. Direct materials and direct labor costs are accumulated
separately, along with information concerning three manufacturing
overhead cost drivers (activities). Assume that the direct labor
rate is $19 per hour and that there were no beginning inventories.
The following information was available for 2016, based on an
expected production level of 53,800 units for the year, which will
require 215,000 direct labor hours:...
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