1. Your company has a customer who is shutting down a production line, and it is your responsibility to dispose of the extrusion machine. The company could keep it in inventory for a possible future product and estimates that the reservation value is $100,000. Your dealings on the secondhand market lead you to believe that if you commit to a price of $200,000, there is a 0.5 chance you will be able to sell the machine. If you commit to a price of $300,000, there is a 0.2 chance you will be able to sell the machine. If you commit to a price of $400,000, there is a 0.15 chance you will be able to sell the machine. These probabilities are summarized in the following table. For each posted price, enter the expected value of attempting to sell the machine at that price. (Hint: Be sure to take into account the value of the machine to your company in the event that you are not be able to sell the machine.) Posted Price Probability of Sale Expected Value ($) (5) $400,000 0.15 $300,000 0.2 $200,000 0.5 a. b. C. Assume you must commit to one posted price. 2. In order to maximize the expected profit of the potential sale, which posted price would you commit to in order to maximize the

1. Your company has a customer who is shutting down a production line, and it is your responsibility to dispose of the extrusion machine. The company could keep it in inventory for a possible future product and estimates that the reservation value is $100,000. Your dealings on the secondhand market lead you to believe that if you commit to a price of $200,000, there is a 0.5 chance you will be able to sell the machine. If you commit to a price of $300,000, there is a 0.2 chance you will be able to sell the machine. If you commit to a price of $400,000, there is a 0.15 chance you will be able to sell the machine. These probabilities are summarized in the following table. For each posted price, enter the expected value of attempting to sell the machine at that price. (Hint: Be sure to take into account the value of the machine to your company in the event that you are not be able to sell the machine.) Posted Price Probability of Sale Expected Value ($) (5) $400,000 0.15 $300,000 0.2 $200,000 0.5 a. b. C. Assume you must commit to one posted price. 2. In order to maximize the expected profit of the potential sale, which posted price would you commit to in order to maximize 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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Our team is hired by Apple to help assess whether or not to continue to manufacture and sell an older model of the iPhone. Apple explains that this model continues to sell well in foreign markets but it worries that fixed costs are so large that it is difficult to earn a profit. The tableau dashboard is provided to aid our analysis of this model. Rent: 10,250,000 Supervisor Salaries: $8,500,000 Office Salaries: $6,000,000 Equipment Depriciation: $5,350,000 Property Taxes: $5,000,000 Battery: $10 Camera: $45 Internal Components: $90 Reciever: $35 Screen: $95 Speaker: $25 Sales Price Per Unit: $750
Please help
The Tolar Corporation has 300 obsolete desk calculators that are carried in inventory at a total cost of $432,000. If these calculators are upgraded at a total cost of $120,000, they can be sold for a total of $180,000. As an alternative, the calculators can be sold in their present condition for $30,000. Assume that Tolar decides to upgrade the calculators. At what selling price per unit would the company be as well off as if it just sold the calculators in their present condition? O $40 per calculator O $154 per calculator O $500 per calculator O $90 per calculator
sheffield corp has several outdated computers that cost a total of 19400 and could be sold as scrap for 6000. they could be updated for additonal 2500 and sold. if sheffield updates the computers and sells them net income will increase by 9000. what amount would be considered sunk costs a)2500 b)21900 c)9000 d)19400
Brandt Enterprises is considering a new project that has a cost of $1,000,000, and the CFO set up the following simple decision tree to show its three most likely scenarios. The firm could arrange with its work force and suppliers to cease operations at the end of Year 1 should it choose to do so, but to obtain this abandonment option, it would have to make a payment to those parties. How much is the option to abandon worth to the firm? WACC-11.5% Prob. -20% Prob. -60% Prob. -20% 1-0 -$1,000 A $55.08 B) $57.98 C) $61.03 D) $64.08 E $67.29 Dollars in Thousands 1-2 $800.0 $800.0 $520.0 $520.0 -$200.0 -$200.0 -$200,0 $800.0 $520.0 NPV This State $938.10 $259.76 -$1,484.52 Prob. x NPV $187.62 $155.86 -$296.90 Exp. NPV-$46.57
Bisha Corporation is considering trading a truck with a book value of SAR 52,000 with an estimated five-year life for a new truck that would cost SAR 80,000. The old truck could be sold for SAR 55,000. The new truck has a five-year life with no residual value. The new truck would reduce annual operating costs by SAR 4,300 per year. Prepare a differential analysis on whether to continue with the old machine (Alternative 1) or purchase the new machine (Alternative 2).
Velstrom Ltd is considering outsourcing one of its products rather than producing it in its factory. The business allocates part of the total rental charge of the factory, based on floor area, on the section responsible for making the product. The section bears a charge of £20,000 per year. If the section were closed, the floor space released would be used for warehousing and, as a result, the business would give up the tenancy of an existing warehouse for which it is paying £25,000 a year. SO what is the answer
Suppose your company has just discovered $100,000 worth (this is the original manufacturing cost) of obsolete inventory in an old warehouse. Your boss asks you to evaluate two options: (1) remachine the obsolete parts at a cost of $30,000 and then hopefully resell them for $60,000 or (2) scrap them for $15,000 cash (which is certain) through a secondhand market. What recommendation would you make to your boss? Explain your reasoning.
Hanshaben
The Tolar Corporation has 400 obsolete desk calculators that are carried in inventory at a total cost of $576,000. If these calculators are upgraded at a total cost of $100,000, they can be sold for a total of $160,000. As an alternative, the calculators can be sold in their present condition for $40,000. What is the financial advantage (disadvantage) to the company from upgrading the calculators? Multiple Choice $20,000 $(560,000) $120,000 $(60,000

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