7 A company that manufactures magnetic membrane swiltches is investigating two p
ID: 1118187 • Letter: 7
Question
7 A company that manufactures magnetic membrane swiltches is investigating two production options that have the estimated cash flows shown ($1 mil lion units). Which one should be selected on the basis of a present worth analysis at 10% per year? In-house Centract Fist cost, Anal cont,5 por year Anneal income, S per yewr Salvage value Life, yearns 33 Find the capitalized cost of a present cost of 300,000, annual costs of $35.000, and periodic an interest rate of12% per year. 6.10 Ten years ago, Jacobson Recovery purchased a wrecker for $285.000 to move disabled 18 wheelers He anticipated a salvage value of $50,000 after 10 years. During this time his average annual revenue totaled $52,000. (a) Did he recover his investment and a 12% per year return? (b) If the annual M&O; cost was $10,000 the first year and increased by a constant $1000 per year, was the AW positive or negative at 12% per year? Assume the $50,000 sal. vage was realized 618 The cash flows for two small raw water treatment systems are shown. Determine which should be selected on the basis of an annual worth analysis at 10% per year interest. 51,000 First cost, $ Anmual cost, S per year Salvage value Life, years 4.000 30 11,000Explanation / Answer
5.7
For In-House Alternative:
Initial investment = $30 million
Time n = 5 years
R = 10%
Annual net income = 14-5 = $9 million
Net present worth = Present value of annual net income + present value of the salvage value – initial investment
Net present worth = 9*(1-1/(1+R)^5)/R + 2/(1+R)^5 – 30
Net present worth = 9*(1-1/1.1^5)/.1 + 2/1.1^5 -30
Net present worth = $5.3589 Million
For Contract Alternative:
Initial investment = 0
Time n = 5 years
R = 10%
Annual net income = 3.1-2 = $1.1 million
Net present worth = Present value of annual net income – initial investment
Net present worth = 1.1*(1-1/(1+10%)^5)/.1 - 0
Net present worth = $4.17 Million
Since the net present worth of the in-house alternative is more that is $5.3489 million, in comparison to the contract alternative that is $4.17 million, then in-house alternative should be selected.
Pl. repost other unanswered questions for their proper answers!
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.