Question
In: Finance
Micro-Pub, Inc., is considering the purchase of one of two microfilm cameras, R and S. Both...
Micro-Pub, Inc., is considering the purchase of one of two microfilm cameras, R and S. Both should provide benefits over a 10-year period, and each requires an initial investment of
$3,000.
Management has constructed the following table of estimates of rates of return and probabilities for pessimistic, most likely, and optimistic results
|
Camera R |
Camera S |
|||
|
Amount |
Probability |
Amount |
Probability |
|
|
Initial investment |
$3,000 |
1.00 |
$3,000 |
1.00 |
|
Annual rate of return |
||||
|
Pessimistic |
21% |
0.21 |
16% |
0.23 |
|
Most likely |
27% |
0.46 |
29% |
0.57 |
|
Optimistic |
31% |
0.33 |
32% |
0.20 |
Which
camera purchase is riskier? Why?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Micro-Pub, Inc., is considering the purchase of one of two microfilm cameras, R and S. Both...
Micro-Pub, Inc., is considering the purchase of one of two
microfilm cameras, R and S. Both should provide benefits over a
10-year period, and each requires an initial investment of
$3,000.
Management has constructed the following table of estimates of
rates of return and probabilities for pessimistic, most likely,
and optimistic results
Camera R
Camera S
Amount
Probability
Amount
Probability
Initial investment
$3,000
1.00
$3,000
1.00
Annual rate of return
Pessimistic
21%
0.21
16%
0.23
Most likely
27%
0.46
29%...
Simple Rate of Return Method The management of Stillford Micro Brew is considering the purchase of...
Simple Rate of Return Method
The management of Stillford Micro Brew is considering the
purchase of an automated bottling machine for $80,000. The machine
would replace an old piece of equipment that costs $33,000 per year
to operate. The new machine would cost $10,000 per year to operate.
The old machine currently in use could be sold now for a scrap
value of $5,000. The new machine would have a useful life of 10
years with no salvage value.
Required:...
A firm is considering the purchase of one of two machines to replace an existing one. MachineA...
A firm is considering the purchase of one of two
machines to replace an existing one. MachineA will cost GBP £18,000
and has a four-year life. Annual net cash flows are expected to be
GBP£7,200, beginning one year after the machine is purchased.
Machine B will cost GBP £26,000and has a six-year life. Annual net
cash flows are expected to be GBP £7,500, beginning oneyear after
the machine is purchased. Assume the firm's cost of capital is a
constant 15%forever, and...
Bismarck Cameras, Inc. manufactures two models of cameras. Model ZM has a zoom lens; Model DS...
Bismarck Cameras, Inc. manufactures two models of cameras. Model
ZM has a zoom lens; Model DS has a fixed lens. Bismarck uses an
activity-based costing system. The following are the relevant cost
data for the previous month:
Direct Cost per Unit
Model ZM
Model DS
Direct materials
$
45
$
20
Direct labor
32
15
Category
Estimated Cost
Cost Driver
Use of Cost Driver
Unit level
$
27,000
Number of units
ZM: 2,400 units; DS: 9,600 units
Batch level...
Perez Cameras, Inc. manufactures two models of cameras. Model ZM has a zoom lens; Model DS...
Perez Cameras, Inc. manufactures two models of cameras. Model ZM
has a zoom lens; Model DS has a fixed lens. Perez uses an
activity-based costing system. The following are the relevant cost
data for the previous month:
Direct Cost per Unit
Model ZM
Model DS
Direct materials
$
20.0
$
9.0
Direct labor
28.0
11.0
Category
Estimated Cost
Cost
Driver
Use of Cost
Driver
Unit level
$
24,990
Number of units
ZM: 2,400 units; DS: 9,500
units
Batch...
Baird Cameras, Inc. manufactures two models of cameras. Model ZM has a zoom lens; Model DS...
Baird Cameras, Inc. manufactures two models of cameras. Model ZM
has a zoom lens; Model DS has a fixed lens. Baird uses an
activity-based costing system. The following are the relevant cost
data for the previous month:
Direct Cost per Unit
Model ZM
Model DS
Direct materials
$
20.00
$
7.00
Direct labor
28.00
9.00
Category
Estimated Cost
Cost Driver
Use of Cost Driver
Unit level
$
25,960
Number of units
ZM: 2,400 units; DS: 9,400 units
Batch level
52,000...
Finch Cameras, Inc. manufactures two models of cameras. Model ZM has a zoom lens; Model DS...
Finch Cameras, Inc. manufactures two models of cameras. Model ZM
has a zoom lens; Model DS has a fixed lens. Finch uses an
activity-based costing system. The following are the relevant cost
data for the previous month:
Direct Cost per
Unit
Model ZM
Model DS
Direct materials
$
20.4
$
7.0
Direct labor
28.8
9.0
Category
Estimated Cost
Cost
Driver
Use of
Cost Driver
Unit level
$
25,960
Number of units
ZM: 2,450 units; DS: 9,350
units
Batch...
Perez Cameras, Inc. manufactures two models of cameras. Model ZM has a zoom lens; Model DS...
Perez Cameras, Inc. manufactures two models of cameras. Model ZM
has a zoom lens; Model DS has a fixed lens. Perez uses an
activity-based costing system. The following are the relevant cost
data for the previous month:
Direct Cost per Unit
Model ZM
Model DS
Direct materials
$
20.9
$
7.0
Direct labor
29.8
9.0
Category
Estimated Cost
Cost Driver
Use of Cost Driver
Unit level
$
25,960
Number of units
ZM: 2,350 units; DS: 9,450 units
Batch...
Stuart Cameras, Inc. manufactures two models of cameras. Model ZM has a zoom lens; Model DS...
Stuart Cameras, Inc. manufactures two models of cameras. Model
ZM has a zoom lens; Model DS has a fixed lens. Stuart uses an
activity-based costing system. The following are the relevant cost
data for the previous month:
Direct Cost per Unit
Model ZM
Model DS
Direct materials
$
20.4
$
9.0
Direct labor
28.8
11.0
Category
Estimated Cost
Cost Driver
Use of Cost Driver
Unit level
$
24,990
Number of units
ZM: 2,450 units; DS: 9,450 units
Batch...
Develop two functions in R, one that generates s^2 using the formation definition, and one that...
Develop two functions in R, one that generates s^2 using the
formation definition, and one that calculates s^2 based on the hand
calculation equation. Generate data from a normal distribution. Use
your functions to calculate s^2 for your generated data. Try this
for various variances so that your data become closer and closer to
the mean (less variance). What do you find, comment.
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