Michelin is considering going "lights-out" in the mixing area of the business that operates 24/7. Currently, personnel with a loaded cost of $560,000 per year are used to manually weigh real rubber, synthetic rubber, carbon black, oils, and other components prior to manual insertion in a Banbary mixer that provides a homogeneous blend of rubber for making tires (rubber products). New technology is available that has the reliability and consistency desired to equal or exceed the quality of blend now achieved manually. It requires an investment of $2,300,000, with $95,000 per year operational costs and will replace all the manual effort described above. The planning horizon is 8 years, and there will be a $260,000 salvage value at that time for the new technology. Marginal taxes are 25%, and the after-tax MARR is 10%. The new investment relates to the 7-Year Property Class. Click here to access the TVM Factor Table Calculator Click here to access the MACRS-GDS table. Part a Determine the annual cost of purchasing the new technology. $

Michelin is considering going "lights-out" in the mixing area of the business that operates 24/7. Currently, personnel with a loaded cost of $560,000 per year are used to manually weigh real rubber, synthetic rubber, carbon black, oils, and other components prior to manual insertion in a Banbary mixer that provides a homogeneous blend of rubber for making tires (rubber products). New technology is available that has the reliability and consistency desired to equal or exceed the quality of blend now achieved manually. It requires an investment of $2,300,000, with $95,000 per year operational costs and will replace all the manual effort described above. The planning horizon is 8 years, and there will be a $260,000 salvage value at that time for the new technology. Marginal taxes are 25%, and the after-tax MARR is 10%. The new investment relates to the 7-Year Property Class. Click here to access the TVM Factor Table Calculator Click here to access the MACRS-GDS table. Part a Determine the annual cost of purchasing the new technology. $

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Michelin is considering going “lights out” in the mixing area of the business that operates 24/7. Currently, personnel with a loaded cost of $600,000 per year are used to manually weigh real rubber, synthetic rubber, carbon black, oils, and other components prior to manual insertion in a Banbary mixer that provides a homogeneous blend of rubber for making tires. New technology is available that has the reliability and consistency desired toequal or exceed the quality of blend now achieved manually. It requires aninvestment of $3.75 million, with $80,000 per year operational costs and will replace all of the manual effort described above. a. How are the current manual expenditures handled for tax purposes? b. How would the new technology expenditures be handled for tax purposes?
Michelin is considering going “lights out” in the mixing area of the business that operates 24/7. Currently, personnel with a loaded cost of $600,000 per year are used to manually weigh real rubber, synthetic rubber, carbon black, oils, and other components prior to manual insertion in a Banbary mixer that provides a homogeneous blend of rubber for making tires (rubber products). New technology is available that has the reliability and consistency desired to equal or exceed the quality of blend now achieved manually. It requires an investment of $2.5 million, with $110,000 per yearoperational costs and will replace all of the manual effort described above. The planning horizon is 8 years and there will be a $300,000 salvage value at that time for the new technology. The income-tax rate is 25% and the after-tax MARR is 10%. a. Determine the annual cost of purchasing the new technology. b. Determine the annual cost of continuing with the manual mixing. c. Determine the amount of the…
. Michelin is considering going "lights out" in the mixing area of the business that operates 24/7. Currently, personnel with a loaded cost of $600,000 per year are used to manually weigh real rubber, synthetic rubber, carbon black, oils, and other components prior to manual insertion in a Banbary mixer that provides a homogeneous blend of rubber for making tires (rubber products). New technology is available that has the reliability and consistency desired to equal or exceed the quality of blend now achieved manually; it will replace all of the manual effort described above. The income-tax rate is 25% and the after-tax MARR is 10%. Determine the after-tax CF for Year 2 (only - not a total) if they decide to continue with manual mixing. Edit Format Table
Michelin is considering going "lights-out" in the mixing area of the business that operates 24/7. Currently, personnel with a loaded cost of $520,000 per year are used to manually weigh real rubber, synthetic rubber, carbon black, oils, and other components prior to manual insertion in a Banbary mixer that provides a homogeneous blend of rubber for making tires (rubber products). New technology is available that has the reliability and consistency desired to equal or exceed the quality of blend now achieved manually. It requires an investment of $2,100,000, with $85,000 per year operational costs and will replace all the manual effort described above. The planning horizon is 8 years, and there will be a $220,000 salvage value at that time for the new technology. Marginal taxes are 25%, and the after-tax MARR is 10%. The new investment relates to the 7-Year Property Class.
4b. Michelin is considering going "lights out" in the mixing area of the business that operates 24/7. Currently, personnel with a loaded cost of $600,000 per year are used to manually weigh real rubber, synthetic rubber, carbon black, oils, and other components prior to manual insertion in a Banbary mixer that provides a homogeneous blend of rubber for making tires (rubber products). New technology is available that has the reliability and consistency desired to equal or exceed the quality of blend now achieved manually; it will replace all of the manual effort described above. The income-tax rate is 25% and the after-tax MARR is 10%. Determine the taxable income for Year 2 (only - not a total) if they decide to continue with manual mixing.
4a. Michelin is considering going “lights out" in the mixing area of the business that operates 24/7. Currently, personnel with a loaded cost of $600,000 per year are used to manually weigh real rubber, synthetic rubber, carbon black, oils, and other components prior to manual insertion in a Banbary mixer that provides a homogeneous blend of rubber for making tires (rubber products). New technology is available that has the reliability and consistency desired to equal or exceed the quality of blend now achieved manually; it will replace all of the manual effort described above. The income-tax rate is 25% and the after-tax MARR is 10%. Determine the before-tax CF for Year 2 (only - not a total) if they decide to continue with manual mixing.
A process control manager is considering two robots to improve materials handling capacity in the production of rigid shaft couplings that mate dissimilar drive components. Robot X has a first cost of $84,000, an annual M&O cost of $31,000, a $40,000 salvage value, and will improve revenues by $96,000 per year. Robot Y has a first cost of $146,000, an annual M&O cost of $28,000, a $47,000 salvage value, and will increase revenues by $119,000 per year. The company’s MARR is 15% per year and it uses a 3-year study period for economic evaluations. Which one should the manager select (a) on the basis of ROR values, and (b) on the basis of the incremental ROR value? (c) Which is the correct selection basis? Perform the analysis by hand or spreadsheet, as instructed.
A process control manager is considering two robots to improve materials-handling capacity in the production of rigid shaft couplings that make dissimilar drive components. Robot X has a first cost of $74,000, an annual M&O cost of $31,000, and $35,000 salvage value, and it will improve revenues by $96,000 per year. Robot Y has a first cost of $146,000, an annual M&O cost of $28,000, and $47,000 salvage value, and it will increase revenues by $120,000 per year. The company's MARR is 10% per year, and it uses a 3-year study period for economic evaluations. Calculate the incremental ROR, and identify the robot the manager should select. The incremental ROR is %. The manager should select robot (Click to select) ♥
Premo Pens, Inc., is in the process of developing a newpen to replace its existing top-of-the-line Executive Model.Market research has identified the critical features the pen must have, and it is estimated that customers would be will-ing to pay $30 for a pen with these features. Premo’s produc-tion manager estimates that with existing equipment it will cost $26 to produce the proposed model. The current Execu-tive Model sells for $24 and has a total production cost of $20. A competitor sells a pen similar to the proposed model,but without Premo’s patented easy retract feature, for $28. Itis estimated to cost the competitor $25 to produce. If Premoseeks to earn a 20 percent return on sales on the new model,which of the following represents the target cost for the newpen?a. $26.00.b. $22.40.c. $24.00.d. $19.80.
Monty Company manufactures automobile components for the worldwide market. The company has three large production facilities in Virginia, New Jersey, and California, which have been operating for many years. Brett Harker, vice president of production, believes it is time to upgrade operations by implementing computer-integrated manufacturing (CIM) at one of the plants. Brett has asked corporate controller Connie Carson to gather information about the costs and benefits of implementing CIM. Carson has gathered the following data: Initial equipment cost $ 7,400,000 Working capital required at start-up $ 600,000 Salvage value of existing equipment $ 107,400 Annual operating cost savings $ 1,202,880 Salvage value of new equipment at end of its useful life $ 286,400 Working capital released at end of its useful life 2$ 600,000 Useful life of equipment 10 years Monty Company uses a 12% discount rate.
Liquid Sleeve, Inc. is a company that makes a sealing solution for machine shaft surfaces that have been compromised by abrasion, high pressures,or inadequate lubrication. The manager is considering adding a metal-based nanoparticle (Type Al or Fe) to its solution to increase the product’s performance at high temperatures. The costs associated with each type are estimated. If the company’sMARRis 20% per year, which nanoparticle type should the company select? Utilize a rate of return analysis.
Guthrie Generators manufactures a solenoid that it uses in several of its products. Management is considering whether to continue manufacturing the solenoids or to buy them from an outside source. The following information is available: 1. The company needs 20,000 solenoids per year. The solenoids can be purchased from an outside supplier at a cost of $15 per unit. 2. The unit cost of manufacturing the solenoids is $20, computed as follows: Direct materials Direct labor Factory overhead: Variable Fixed Total manufacturing costs Cost per unit ($400,000 ÷ 20,000 units) 3. If the company decides not to manufacture the solenoids, it will eliminate all of the raw materials and direct labor costs but only 75 percent of the variable factory overhead costs. 4. If the solenolds are purchased from the outside source, machinery used in the production of solenoids will be sold at its book value. Accordingly, no gain or loss will be recognized. The sale of this machinery would also eliminate $5,000…