x2:08QUESTION 17Firm X builds a low-cost product. Due to overseas competition, the firm is going to expand its line of products and introduce a new premium line. Below are the details of the investment.Cost of new equipment: $90,000Installation cost of equipment: $40,000O a.-5,068O b.6,610O c. 12,703O d. 17,756O e. 25,294Assuming a WACC of 13%, what is this project's NPV?QUESTION 18741Click Save and Submit to save and submit. Click Save All Answers to save all answers.QLife of equipment: 5 years, Straight line depreciationExpected sales: $170,000 per year• Expected reduction in sales generic product as customers shift to the new line: $10,000 per yearARaw material cost: $90,000 per yearNew worker salary: $20,000 per yearRequired Networking capital over the life of the project: $20,000Expected Salvage value of equipment at the end of 5 year: $30,000Tax rate: 35%140027**WS4037I1ED4%1 5RFITGMacBook ProTYH1U8((.11J851OIKOL

NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…

Answered: QUESTION 17 Firm X builds a low-cost…

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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excel break even point Schweser Satellites Inc. produces satellite earth stations that sell for $95,000 each. The firm's fixed costs, F, are $2 million, 50 earth stations are produced and sold each year, profits total $400,000; and the firm's assets (all equity financed) are $4 million. The firm estimates that it can change its production process, adding $3 million to investment and $360,000 to fixed operating costs. This change will (1) reduce variable costs per unit by $12,000 and (2) increase output by 23 units, but (3) the sales price on all units will have to be lowered to $84,000 to permit sales of the additional output. The firm has tax loss carry forwards that render its tax rate zero,
Oman ceramics company SAOG manufacture high quality vitreous china sanitary ware in Oman. It is presently operating at 80% capacity, the company’s repairs and maintenance cost is estimated as OMR 80,000 (30% fixed ), if the company operates at 90% capacity, how much the variable cost the company should spend for repairs and maintenance? a. OMR 56,000 b. OMR 50,000 c. None of these d. OMR 63,000
Question 2 Kosova Itd is a new formed firm which intends to penetrate in the international market. The newly formed firm produces car radios, which currently it sells to car manufacturers for £60 each. Next year the business plans to make and sell 20,000 radios. The business's costs are as follows: Manufacturing Variable materials £20 per radio £14 per radio £12 per radio Variable labour Other variable costs Fixed cost £80,000 per year Administration and selling Variable £3 per radio £60,000 per year Fixed Required: (a) Calculate the break-even point for next year, expressed both in quantity of radios and sales value. (b) Calculate the operating leverage for next year, and discuss why operating leverage is useful. value.
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Q.23 HM motors is considering eliminating its mountain bike division, which reported an operating loss for the recent year of P3,000. The division sales for the year = P1,050,000, variable costs = P860,000 Fixed costs of the division =P193,000 If the mountain bike division is dropped, 30% of the fixed costs allocated to that division could be eliminated. The impact on operating income for eliminating this business segment would be: a.57,900 decrease b.132,100 decrease c.54,900 decrease d.190,000 increase
QUESTION 1 Loki Bhd is a profitable medium-sized toy manufacturer. It is considering an investment in a new machine, with a maximum output of 250,000 units per annum, in order to manufacture a new toy. Market research undertaken for the company indicated a link between selling price and demand, and the research agency involved has suggested a sales strategy that could be implemented, as follows: Selling price (in current price terms) Sales volume in first year Annual increase in sales volume after first year Sales Strategy RM7.00 per unit 115,000 units 15% Required: Loki Bhd expects economies of scale to reduce the variable cost per unit as the level of production increases. When 100,000 units are produced in a year, the variable cost per unit is expected to be RM3.00 (in current price terms). For each additional 10,000 units produced in excess of 100,000 units, a reduction in average variable cost per unit of RM0.05 is expected to occur. The average variable cost per unit when…
Page 266 MINICASE Flowton Products enjoys a steady demand for stainless steel infiltrators used in a number of chemical processes. Revenues from the infiltrator division are $50 million a year, and production costs are $47.5 million. However, the 10 high-precision Munster stamping machines that are used in the production process are coming to the end of their useful life. One possibility is simply to replace each existing machine with a new Munster. These machines would cost $800,000 each and would not involve any additional operating costs. The alternative is to buy 10 centrally controlled Skilboro stampers. Skilboros cost $1.25 million each, but compared with the Munster, they would produce a total saving in operator and material costs of $500,000 a year. Moreover, the Skilboro is sturdily built and would last 10 years, compared with an estimated seven-year life for the Munster. Analysts in the infiltrator division have produced the accompanying summary table, which shows the…
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