alternativés. You should use the present value tables in the Coursepack. The Bri

Question

alternativés. You should use the present value tables in the Coursepack. The Brisbane Manufacturing Company produces a single model of a CD player. Each player is sold for $207 with a resulting contribution argin of $80. Brisbane's management is considering a change in its quality control system. Currently, Brisbane spends $38,000 a year to inspect the CD players. An average of 2,000 units turn out to be defective 1,400 of them are detected in the inspection process and are repaired for $75 If a defective CD player is not identified in the inspection process, the customer who receives it is given a full refund of the purchase price. The proposed quality control system involves the purchase of an x-ray machine for $190,000. The machine would last for four years and would have salvage value at that time of $21,000. Brisbane would also spend $560,000 immediately to train workers to better detect and repair defective units. Annual inspection costs would increase by $20,000. This new control system would reduce the number of defective units to 350 per year. 295 of these defective units would be detected and repaired at a cost of $49 per unit. Customers who still received defective players would be given a refund equal to one-and-a-fourth times the purchase price. Questions 1& 2 [0 points; unlimited tries] 1, What is the Year 2 cash flow if Brisbane keeps using its current system? L Submit Answer Tries o/99 2. what is the Year 2 cash flow if Brisbane replaces its current system? Submit Answer Tries 0/99 Questions 3 &4 15 points each; s tries each] 3. Assuming a discount rate of 6%, what is the net present value if Brisbane keeps using its current system? Submit Answer Tries o/s 4. Assuming a discount rate of 6%, what is the net present value if Brisbane replaces its current system? Submit Answer Tries o/5 ThreadedVie arked as NEW Mark NEW postsnolongerney My genera

Explanation / Answer

Answer 1: ($107,200)

Answer 2: $84,698.75 or round it off to zero decimal place and answer would be $84,699

Answer 3 : ($372,531)

Answer 4: ($439,029)

If Brisbane keeps using its current system Year1 Year 2 Year 3 Year 4 Total Inspection Charges ($38,000) ($38,000) ($38,000) ($38,000) Defective Unit repair cost (1400 x $75) ($105,000) ($105,000) ($105,000) ($105,000) Refund to customer (600 x $207) ($124,200) ($124,200) ($124,200) ($124,200) Contribution (2000 x $80) $160,000 $160,000 $160,000 $160,000 Net Cashflow ($107,200) ($107,200) ($107,200) ($107,200) PV @ 6% 0.9434 0.9 0.8396 0.7921 Present Value ($101,132.48) ($96,480.00) ($90,005.12) ($84,913.12) ($372,531)

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