An automobile company needs to decide of outsourcing shafts or producing shafts in the company. If the company outsource the shafts, the shafts could be purchased kin the first year for $30 per shaft but the price of shaft for the subsequent years will increase by 5% from the previous year. If the company decide to produce the shafts, an investment of $3,000,000 needed for equipment and upgrades. The total annual cost associated with production (e.g. fixed, variable, labor and material cost) is $1,000,000. The annual demand is 40,000 shafts for the next 7 years. The new equipment purchased will have a salvage value of $450,000 at the end of year 7.

Letang Industrial Systems Company (LSC) is trying to decide between two different conveyor belt systems. System A costs $325,000, has a four-year life, and requires $121,000 in pretax annual operating costs. System B costs $405,000, has a sle-year life. and requires $115,000 in pretax annual operating costs. Suppose the company always needs a conveyor belt system when one wears out, it must be replaced. Assume the tax rate is 22 percent and the discount rate is 11 percent Calculate the EAC for both conveyor belt systems. (A negative answer should be Indicated by a minus sign. Do not round Intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) System A System D 11:36 AM/

Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period.  After careful study, Oakmont estimated the following costs and revenues for the new product: When the project concludes in four years the working capital will be released for investment elsewhere within the company. Required:  Using Excel (this will save you time and effort) answer the following: Oakmont’s cost of capital is 15%, and management does not feel it should have any adjustment for risk, compute the NPV. Same situation as (a), but management does feel this project does possess a greater than average risk, so 19% should be the required rate of return. Compute the NPV. Management is concerned that Sales Revenues and Expenses could be rising due to inflationary factors.  So the projection for year 1 is as shown, but that sales revenues will grow by 2% per year for years 2-4; and that variable expenses will grow by 4% per year for years 2-4, and that fixed out-of-pocket operating…

A general manager wants to know the economic service life of currently owned machines.  The market value of the machines and the maintenance and operating costs are shown below. Use the company’s MARR of 15% per year to determine the ESL. Year Market Value Annual Cost Total Annual Worth 0 $40,000 N/A N/A 1 $30,000 $20,000 -$36,000 2 $25,000 $22,000 -$33,907 3 $12,000 $24,000   4 $2,000 $26,000 -$36,263

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Himalayan Engineering Works currently takes four days to convert the raw material and components to finished goods. The firm is considering in buying a set of new machines which will reduce the conversion time to 1.5 days. If the firm decides to buy the machines, how does this decision affect the working capital requirement? Working Capital requirement will increase Working Capital requirement will decrease No change in working capital requirement Change in conversion time has no relationship with working capital requirement

A global manufacturer of electrical switching equipment(ESE) is considering outsourcing the manufacturing ofan electrical breaker used in the manufacturing of switchboards. The company estimates that the annual fixed cost ofmanufacturing the part in-house, which includes equipment,maintenance, and management, amounts to $8 million. Thevariable cost of labor and materials are $11.00 per breaker.The company has an offer from a major subcontractor to pro-duce the part for $16.00 per breaker.a. How many breakers would the electrical switching equip-ment company need per year to make the in-house optionthe least costly?b. Assume the subcontractor wants the company to share inthe costs of the equipment. The ESE company estimatesthat the total annual cost would be $5 million, whichalso includes management oversight for the new supplycontract. For this concession, the subcontractor will dropthe per-unit price to $12.00. Under this assumption, howmany breakers would the ESE company need per…

Can you kindly help show the steps for calculating the Working Capital for a product line capable of producing 1.25 Million units per year, total estimated investment cost for the new line is $25 Million, selling price is fixed for the project life at $125 per unit. Working capital based on a 2.5-month supply of raw materials and 1.5 months of combined inventory (WIP and finished goods)? Variable costs per unit include $35 for materials, $20 for manufacturing, and $18 for labor. There are additional fixed operating and maintenance costs totaling $14.25 Million per year. Salvage value equal to 20% of the purchase price at the end of the 6-year project life. The Federal tax rate is 23% and State tax rate is 8.75%. MARR of 18%. Inflation is expected to increase the variable and fixed costs by 6.4% after the first year. In years 3- 6, inflation is expected to decline by 1.2% each year (year 2 inflation is 6.4%, year 3 is 5.2%, etc.)  The project falls under a 7-year MACRS class life.  The…