Chile's, Inc. currently produces and sells 4,000 units of a product that has a contribution margin of $6 per unit. The company sells the product for a sales price of $20 per unit. Fixed costs are $18,000. The company has considering investing in new technology that would decrease the variable cost per unit to $8 per unit and increase fixed costs to $33,000. The company expects the new technology to increase production and sales to 9,000 units of product. ?What sales price would have to be charged to earn a $93,000 target profit $8 O $16 O $22 $18 $20
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- Hit or Miss Sports is introducing a new product this year. If its see-at-night soccer balls are a hit, the firm expects to be able to sell 42,800 units a year at a price of $70 each. If the new product is a bust, only 20,700 units can be sold at a price of $45. The variable cost of each ball is $26 and fixed costs are zero. The cost of the manufacturing equipment is $5.86 million, and the project life is estimated at 10 years. The firm will use straight-line depreciation over the 10-year life of the project. The firm's tax rate is 35% and the discount rate is 14%. a. If each outcome is equally likely, what is the expected NPV? ( Use the minus sign for negative value. Round your answer to the nearest dollar.) NPV $ Will the firm accept the project? The firm will (Click to select) v the project. b. Suppose now that the firm can abandon the project and sell off the manufacturing equipment for $5.2 million if demand for the balls turns out to be weak. The firm will make the decision to…Hit or Miss Sports is introducing a new product this year. If its see-at-night soccer balls are a hit, the firm expects to be able to sell 42,700 units a year at a price of $64 each. If the new product is a bust, only 22,200 units can be sold at a price of $41. The variable cost of each ball is $27 and fixed costs are zero. The cost of the manufacturing equipment is $5.92 million, and the project life is estimated at 9 years. The firm will use straight-line depreciation over the 9-year life of the project. The firm's tax rate is 35% and the discount rate is 13%. Now suppose that Hit or Miss Sports can expand production if the project is successful. By paying its workers overtime, it can increase production by 20,100 units; the variable cost of each ball will be higher, equal to $32 per unit. By how much does this option to expand production increase the NPV of the project? Assume that the firm decides whether to expand production after it learns the first-year sales results. (Round…A bicycle manufacturer currently produces 237,000 units a year and expects output levels to remain steady in the future. It buys chains from an outside supplier at a price of $2.20 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 $293,000 and would be obsolete after 10 years. This investment could be depreciated to zero for tax purposes using a 10-year straight-line depreciation schedule. The plant manager estimates that the operation would require $44,000 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 10 years. Expected proceeds from scrapping the machinery after 10 years are $21,975. If the company pays tax at a rate of 35% and the opportunity cost of capital is 15%, what is the net present value of the decision to produce the…
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- Supersonic Tire Company makes a special kind of racing tire. Variable costs are $210 per unit, and fixed costs are $42,000 per month. Supersonic sells 400 units per month at a sales price of $320. If the quality of the tire is upgraded, the company believes it can increase the price to $350. If so, the variable cost will increase to $220 per unit, and the fixed costs will rise by 20%. If Supersonic decides to upgrade, how will operating income be affected? A. Operating income will increase by $20. B. Operating income will decrease by $400. C. Operating income will decrease by $12,000. D. Operating income will increase by $12,000.The Flashtic Co. sells a special type of flashlights which does not use dry-cell batteries but operates with “sun energy”. The product would incur a total variable cost of P18 per unit to manufacture and sell. The plant has a capacity of 20,000 units per month at P180,000 fixed costs and expenses, excluding its monthly interest charges ofP45,000. This product has a contribution margin of 55%. At present the plant is operating at 80% of its capacity. Management plans to increase its current sales by 20% next year. Question: If the number of units sold exceeded the break-even point by 650 units, how much is the profit or loss?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…Company XYZ produces and sells scientific calculators. The company is currently producing and selling 10,000 units. At this level, the fixed expenses were $10,500. In order to expand sales, the company plans to reduce the selling price by $2, which is expected to imphove unit sales by 40% and achieve fixed cost savings of $10,0000. Given that the company does not pay commissions to its sales people, the variable expenses per unit are expected to remain the same. What would be the impact on profit? O a. Decrease by $5,000 O b. Increase by $1,000 O c. Decrease by $6,000 O d. Increase by $2,000 O e. No changeABC is a company that does land surveys and engineering consulting. They have an opportunity to purchase new computer equipment that will allow them to render their drawings and surveys much more quickly. The new equipment will cost them an additional $1,200 per month, but they will be able to increase their sales by 10% per year. Their current annual cost and break-even figures are shown below. Units sold 1,400 Sales proce per unit 225 variable cost per unit 145 fixed costs 52,000 break even (in units) 650 contribution margin ratio 0.36 break even in dollars 146,250 sales 315,000 variable cost 203,000 fixed costs 52,000 net income loss 60,000 What will be the impact on the break-even point if ABC purchases the new computer? A. What will be the impact on net operating income if ABC purchases the new computer? B. What would be your recommendation to ABC regarding this purchase? Current New Computer Units sold Sales price per unit…