A bicycle manufacturer currently produces 391,000 units a year and expects output levels to remain steady in the future. It buys chains from an outside supplier at a price of $2.10 a chain. The plant manager believes that it would be cheaper to make these chains rather than buy them. Direct in-house production costs are estimated to be only $1.60 per chain. The necessary machinery would cost $292,000 and would be obsolete after ten years. This investment could be depreciated to zero for tax purposes using a ten-year straight-line depreciation schedule. The plant manager estimates that the operation would require $43,000 of inventory and other working capital upfront (year 0), but argues that this sum can be ignored since it is recoverable at the end of the ten years. Expected proceeds from scrapping the machinery after ten years are $21,900. If the company pays tax at a rate of 20% and the opportunity cost of capital is 15%, what is the net present value of the decision to produce the chains in-house instead of purchasing them from the supplier? Project the annual free cash flows (FCF) of buying the chains. The annual free cash flows for years 1 to 10 of buying the chains is $ (Round to the nearest dollar. Enter a free cash outflow as a negative number.)

Given the soaring price of gasoline, Ford is considering introducing a new production line of gas-electric hybrid sedans. The expected annual unit sales of the hybrid cars is 26,000; the price is $21,000 per car. Variable costs of production are $11,000 per car. The fixed overhead including salary of top executives is $80 million per year. However, the introduction of the hybrid sedan will decrease Ford's sales of regular sedans b 9,000 cars per year; the regular sedans have a unit price of $20,000, a unit variable cost of $12,000, and fixed costs of $250,000 per year. Depreciation costs of the production plant are $49,000 per year. The marginal tax rate is 40 percent. What is the incremental annual cash flow from operations? Incremental annual cash flow from operations eTextbook and Media $

Madetaylor Inc. manufactures financial calculators.  The company is deciding whether to introduce a new calculator.  This calculator will sell for $130.  The company feels that sales will be 18,000, 22,000, 24,000, 22,000, and 18,000 units annually for the next five years.  Variable costs will be 21% of sales, and fixed costs are $500,000 annually.  The firm hired a marketing team to analyze the product's viability, and the marketing analysis cost $1,250,000.  The company plans to manufacture and store the calculators in a vacant warehouse.  Based on a recent appraisal, the warehouse and the property are worth $2.5 million after tax.  If the company does not sell the property today, it will sell it five years from today at the currently appraised value.  This project will require an injection of net working capital at the onset of the project, $250,000.  The firm recovers the net working capital at the end of the project.  The firm must purchase equipment for $5,000,000 to produce the…

Madetaylor Inc. manufactures financial calculators.  The company is deciding whether to introduce a new calculator.  This calculator will sell for $130.  The company feels that sales will be 18,000, 22,000, 24,000, 22,000, and 18,000 units annually for the next five years.  Variable costs will be 21% of sales, and fixed costs are $500,000 annually.  The firm hired a marketing team to analyze the product's viability, and the marketing analysis cost $1,250,000.  The company plans to manufacture and store the calculators in a vacant warehouse.  Based on a recent appraisal, the warehouse and the property are worth $2.5 million after tax.  If the company does not sell the property today, it will sell it five years from today at the currently appraised value.  This project will require an injection of net working capital at the onset of the project, $250,000.  The firm recovers the net working capital at the end of the project.  The firm must purchase equipment for $5,000,000 to produce the…

Can someone help me with part B of this problem?: Verasource Microprocessor Corporation sells 200 computer chips a month for $1,500 each. variable costs are $1,500,000. Fixed costs are $500,000. there's a defect rate of 8%. What is the hidden cost to the company of making this rate of defectives instead of 2,000 good chips each month? Suppose a six sigma effort can reduce the defects to a six sigma level. what is the impact on profitability?

Under pressure from its board of directors, management at Roadside is planning to enter the conventional battery-powered flashlight market.  Roadside expects to sell this boring product to wholesalers for $18.12 per unit.  Relevant fixed costs will total $334,573, and variable costs to make this product will be $14.57 per unit.  Background research estimates the size of the market for conventional flashlights at 1.8 million units per year. If sales of this unit reach breakeven, what market share will Roadside have? Report your answer as a percent.  Report 27.5%, for example, as "27.5". Rounding: tenth of a percent.

Madetaylor Inc. manufactures financial calculators.  The company is deciding whether to introduce a new calculator.  This calculator will sell for $130.  The company feels that sales will be 18,000, 22,000, 24,000, 22,000, and 18,000 units annually for the next five years.  Variable costs will be 21% of sales, and fixed costs are $500,000 annually.  The firm hired a marketing team to analyze the product's viability, and the marketing analysis cost $1,250,000.  The company plans to manufacture and store the calculators in a vacant warehouse.  Based on a recent appraisal, the warehouse and the property are worth $2.5 million after tax.  If the company does not sell the property today, it will sell it five years from today at the currently appraised value.  This project will require an injection of net working capital at the onset of the project, $250,000.  The firm recovers the net working capital at the end of the project.  The firm must purchase equipment for $5,000,000 to produce the…

“In my opinion, we ought to stop making our own drums and accept that outside supplier’s offer,” said Wim Niewindt, managing director of Antilles Refining, N.V., of Aruba. “At a price of $20 per drum, we would be paying $5.45 less than it costs us to manufacture the drums in our own plant. Since we use 80,000 drums a year, that would be an annual cost savings of $436,000.” Antilles Refining’s current cost to manufacture one drum is given below (based on 80,000 drums per year):   Direct materials $ 12.00 Direct labor 6.50 Variable overhead 1.50 Fixed overhead ($2.90 general company overhead, $1.80 depreciation, and $0.75 supervision) 5.45 Total cost per drum $ 25.45   A decision about whether to make or buy the drums is especially important at this time because the equipment being used to make the drums is completely worn out and must be replaced. The choices facing the company are: Alternative 1: Rent new equipment and continue to make the drums. The equipment would be…