A company looking to produce a table. The design is made using the costs: $550 in steel, $121 in wood and $46 in other materials. The steel has inflation rate of 5% per year and the wood has fixed price and doesn't change with inflation. If a customer were to buy 20 tables per year at $5000 per table for the next 11 years, what is the NPV of this purchase if MARRC is 25% and inflation is 3.5%? If the customer defers the

A company looking to produce a table. The design is made using the costs: $550 in steel, $121 in wood and $46 in other materials. The steel has inflation rate of 5% per year and the wood has fixed price and doesn't change with inflation. If a customer were to buy 20 tables per year at $5000 per table for the next 11 years, what is the NPV of this purchase if MARRC is 25% and inflation is 3.5%? If the customer defers the

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The purchasing price for a dye press is $30,000. It is expected to provide labour cost savings of $5,000 in year 1. The savings are expected to increase linearly by X$ each year for seven years. Find the dollar value of X such that the purchase price is justified by the labour savings at MARR = 5%.The solution is with $1 of which of the following?65.8067.8069.8071.80None of the above
A precision lathe costs $11,300 and will cost $26,500 a year to operate and maintain. If the discount rate is 12% and the lathe will last for 4 years, what is the equivalent annual cost of the tool? (Enter your answer as positive value. Round your answer to the nearest cent.) The equivalent annual cost $
Econo-Cool air conditioners cost $345 to purchase, result in electricity bills of $159 per year, and last for 5 years. Luxury Air models cost $545, result in electricity bills of $118 per year, and last for 8 years. The discount rate is 25%. a. What is the equivalent annual cost of the Econo-Cool model? (Do not round intermediate calculations. Round your answers to 2 decimal places.) b. What is the equivalent annual cost of the Luxury Air model? (Do not round intermediate calculations. Round your answers to 2 decimal places.) c. Which model is more cost-effective? d-1. Now you remember that the inflation rate is expected to be 10% per year for the foreseeable future. What is the equivalent annual cost of the Econo-Cool and Luxury Air model? (Do not round intermediate calculations. Round your answers to 2 decimal places.) d-2. Which model is more cost-effective?
The ABC Corporation is considering introducing a new product, which will require buying new equipment for a monthly payment of $5,000. Each unit produced can be sold for $20.00. ABC incurs a variable cost of $10.00 per unit. Suppose that ABC would like to realize a monthly profit of $50,000. How many units must they sell each month to realize this profit?
Your factory has been offered a contract to produce a part for a new printer. The contract would last for 3 years and your cash flows from the contract would be $5.00 million per year. Your upfront setup costs to be ready to produce the part would be $8.00 million. Your discount rate for this contract is 8.0%. a. What does the NPV rule say you should do? b. If you take the contract, what will be the change in the value of your firm? Question content area bottom Part 1 a. What does the NPV rule say you should do? The NPV of the project is $ enter your response here XX million. (Round to two decimal places.)
A precision lathe costs $10,400 and will cost $22,000 a year to operate and maintain. If the discount rate is 13% and the lathe will last for 4 years, what is the equivalent annual cost of the tool? (Enter your answer as positive value. Round your answer to 2 decimal places.) The equivalent annual cost $
Your factory has been offered a contract to produce a part for a new printer. The contract would last for 3 years and your cash flows from the contract would be $4.99 million per year. Your upfront setup costs to be ready to produce the part would be $8.06 million. Your discount rate for this contract is 8.1%. a. What does the NPV rule say you should do? b. If you take the contract, what will be the change in the value of your firm? *round to two decimal places*
Your factory has been offered a contract to produce a part for a new printer. The contract would last for 3 years and your cash flows from the contract would be $5.05 million per year. Your upfront setup costs to be ready to produce the part would be $8.22 million. Your discount rate for this contract is 8.3%. a. What does the NPV rule say you should do? b. If you take the contract, what will be the change in the value of your a. What does the NPV rule say you should do? The NPV of the project is $ million. (Round to two decimal places.) firm?
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