The Johnson Company pays $1,650 a month to a trucker to haul wastepaper and cardboard to the city dump. The material could be recycled if the company were to buy a $50,000 press baler and spend $20,000 a year for one worker to operate the baler. The baler has an estimated useful life of 14 years, with no şalvage value. Strapping material would cost $1600 per year for the estimated 650 bails a year that would be produced. A wastepaper company will pick up the bales at the plant and pay Johnson for them. In order to justify the baler, how much should Johnson charge the wastepaper company for each bale? Use an interest rate of 8% per year.________.

The Johnson Company pays $1,650 a month to a trucker to haul wastepaper and cardboard to the city dump. The material could be recycled if the company were to buy a $50,000 press baler and spend $20,000 a year for one worker to operate the baler. The baler has an estimated useful life of 14 years, with no şalvage value. Strapping material would cost $1600 per year for the estimated 650 bails a year that would be produced. A wastepaper company will pick up the bales at the plant and pay Johnson for them. In order to justify the baler, how much should Johnson charge the wastepaper company for each bale? Use an interest rate of 8% per year.________.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 4P

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The Johnson Company pays $1700 a month to a trucker to haul wastepaper and cardboard to the city dump. The material could be recycled if the company were to buy a $48,000 hydraulic press baler and spend $21,000 a year for labor to operate the baler. The baler has an estimated useful life of 15 years and no salvage value. Strapping material would cost $1500 per year for the estimated 600 bales a year that would be produced. A wastepaper company will pick up the bales at the plant and pay Johnson $27 per bale for them. Use an annual cash flow analysis and an interest rate of 8% to recommend whether it is economical to install and operate the baler.
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