Linkin Corporation is considering purchasing a new delivery truck. The truck has many advantages over the company's current truck (not the least of which is that it runs). The new truck would cost $56,980. Because of the increased capacity, reduced maintenance costs, and increased fuel economy, the new truck is expected to generate cost savings of $7,700. At the end of the 8 years, the company will sell the truck for an estimated $27,600. Traditionally the company has used a rule of thumb that a proposal should not be accepted unless it has a payback period that is less than 50% of the assets estimated useful life. Larry Newton, a new manager has suggested that the company should not rely solely on the payback approach, but should also employ the net present value method when evaluating new projects. The company's cost of capital is 8%
In: Accounting
Chapter 12 Question 3:
The management of Ballard MicroBrew is considering the purchase of an automated bottling machine for $50,000. The machine would replace an old piece of equipment that costs $13,000 per year to operate. The new machine would cost $6,000 per year to operate. The old machine currently in use could be sold now for a salvage value of $20,000. The new machine would have a useful life of 10 years with no salvage value.
Required:
1. What is the annual depreciation expense associated with the new bottling machine?
2. What is the annual incremental net operating income provided by the new bottling machine?
3. What is the amount of the initial investment associated with this project that should be used for calculating the simple rate of return?
4. What is the simple rate of return on the new bottling machine?
In: Accounting
There is a new outbreak called pink ear; people who contract the disease become totally deaf in a matter of weeks. A vaccination has been created. Health officials have determined that pink ear can be prevented from spreading across the nation and becoming a pandemic issue if laws are put into place to ensure every child under the age of five is vaccinated.
Address the items below and explain how the public health policy process works. Evaluate public health policy effectiveness.
In: Nursing
A manufacturer of small engines concerned with the issue of noise pollution developed a new engine that would, it was hoped, be quieter than the standard model. Forty-one of the new models were tested for noise level and compared with 65 of the standard models. The results are given below with noise measured in decibels. (The higher the decibel is, the higher the noise level is ). Assume that the noise levels of both the standard and the new model engines are normally distributed.
| Sample Size | Sample Mean (Decibels) | Sample Standard deviation (decibels) | |
| Standard Model | 65 | 84 | 11.6 |
| New Model | 41 | 72 | 9.2 |
At 5 % level of significance, test the claim (using test of hypothesis procedure) that the new model is significantly quieter than the old model. Use P-value method. Show all four steps and showcompletework. UseP-ValueMethod.
In: Statistics and Probability
The RW Company is proposing to replace its old welt-making machinery with more modern equipment. The new equipment costs $9 million (the existing equipment has zero salvage value). The attraction of the new machinery is that it is expected to cut manufacturing costs from their current level of $8 a welt to $4. However, as the following table shows, there is some uncertainty both about future sales and about the performance of the new machinery:
|
Pessimistic |
Expected |
Optimistic |
|
|---|---|---|---|
|
Sales, millions of welts |
0.4 |
0.5 |
0.7 |
|
Manufacturing cost with new machinery, dollars per welt |
6 |
4 |
3 |
|
Economic life of new machinery, years |
7 |
10 |
13 |
Calculate the annual cost savings of the expected scenario. Assume a discount rate of 12%. RW does not pay taxes.
In: Finance
. Topsider Inc. is considering the purchase of a new
leather-cutting machine to replace an existing machine that has a
book value of $3,000 and can be sold for $1,500. The old machine is
being depreciated on a straight-line basis, and its estimated
salvage value 3 years from now is zero. The new machine will reduce
costs (before taxes) by $7,000 per year. The new machine has a
3-year life, it costs $14,000, and it can be sold for an expected
$2,000 at the end of the third year. The new machine would be
depreciated over its 3-year life using the MACRS method. Assuming a
40 percent tax rate and a required rate of return of 16 percent,
find the new machine's NPV.
A. -$2,822
B. $1,658
C. $4,560
D. $15,374
E. $9,821
In: Finance
|
Southern Alliance Company needs to raise $70 million to start a new project and will raise the money by selling new bonds. The company will generate no internal equity for the foreseeable future. The company has a target capital structure of 70 percent common stock, 15 percent preferred stock, and 15 percent debt. Flotation costs for issuing new common stock are 10 percent, for new preferred stock, 7 percent, and for new debt, 2 percent. |
|
What is the true initial cost figure the company should use when evaluating its project? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to the nearest whole dollar amount, e.g., 32.) |
| Initial cost |
$ |
In: Finance
Please solve it the easy way.
Several drugs are used to treat diabetes. A sales specialist for
a leading pharmaceutical company needs an estimate of the number of
new prescriptions that were written during a particular month for
his company’s new diabetes drug. The numbers of new prescriptions
in a random sample of 25 sales districts are as follows:
210 240 190 275 290 185 223 190 185 192
265 312 284 261 243 168 240 170 187 190
215 240 210 235 290
1. Find a 90% confidence interval for the average number of new
prescriptions written for this new drug among all the sales
districts. State the assumptions.
2. Calculate the widths for 95% and 98% confidence intervals.
In: Statistics and Probability
King Fisher Aviation is considering an investment in a new technology for a drone project with a price of $16 million. Their current technology has a book value of $5 million and a market value of $5 million. The new technology is expected to have a five (5) year life, and the old technology has three (3) years left in which it can be expected to be used. If the firm replaces the old technology with the new technology it expects to save $5.7 million in operating costs each year over the next four years. If the firm purchases the new technology, it will also need an investment of $300,000 in net working capital. The required return on the investment is 12 percent, and the tax rate is 39 percent.
What are your recommendations on the investment project? Explain your reasoning?
What are your recommendations for investment in the new technology?
In: Finance
Return on Investment Michelle Gutierrez, manager of the Components Division of FX Corp, is considering a new investment for her division. Her division has an investment base of $4,000000 and operating income of $600,000. The new investment of $500,000 supports corporate strategy and is expected to increase operating income by $50,000 next year, an acceptable level of return from a corporate headquarters point of view.
a.) What is the current return on investment (ROI) for the components division?
Answer:
b.) What will the (ROI) be if Michelle undertakes the new investment?
Answer:
c.) Suppose Michelle’s compensation consists of a salary plus a bonus proportional to her divisions ROI. Is Michelle’s new compensation higher with or without the new investment?
Answer:
d.) Suggest changes to FX Corporation’s management that will better align performance evaluation and compensation with corporate goals.
In: Accounting