Answered: wallace inc is considering spending…

wallace inc is considering spending $100,000 for a new grinding machine. this amount could be invested to yield a 12% return. what is the opportunity cost?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: Perot Corporation is developing a new CPU chip based on a new type of technology. Its new chip, the…

A: Here,

Q: Columbia Sheetmetal is thinking about purchasing a new machine that will have an expected life of 8…

A: The IRR is a measure of the profitability of a project. It signifies the maximum return for which…

Q: Swifty Corporation is contemplating the production and sale of a new widget. Projected sales are…

A: 1. PROJECTED SALES : = $360,000 2. DESIRED PROFIT : = $45,000 3. TOTAL TARGETED COST : =…

Q: An office park is considering investing in upgrades to make its buildings more energy efficient.…

A: According to fischer effect , (1+nominal rate ) = ( 1+ real rate) × ( 1+ inflation rate) Nominal…

Q: A sales engineer claims that his pump is economically justifiable. He says that for a cost of…

A: A company's main aim is to maximize the wealth of it's shareholders. For this, companies should…

Q: Fantastic Footwear can invest in one of two different automated clicker cutters. The first, A, has…

A: The IRR represents the actual return provided to the project. The IRR is used to measure the…

Q: A new electronic process monitor costs $990,000. This cost could be depreciated at 30% per year…

A: NPV is also known as Net present Value. It is a capital budgeting technqiues which help in decision…

Q: A particular service can be purchased for $130 per unit. The same service can be provided by…

A: Internal Rate of return ( IRR) is Capital budgeting techniques which help in decision making on the…

Q: consulting firm to analyze the option to expand your sales. According to ABC consulting this is a…

A: Net present value is the difference between the present value of cash flow and initial investment.…

Q: Fantastic Footwear can invest in one of two different automated clicker cutters. The first, A, has a…

A: IRR refers to the internal rate of return. IRR is the rate at which NPV is nil.

Q: Acme Products, Inc. is interested in producing and selling an improved widget. Market research…

A: TOTAL COSTTotal Cost is the cost incurred to manufacturing a product.Total Cost Includes Cost of Raw…

Q: BURKAY casting factory wants to buy a furnace to meet their increasing production demands. As a…

A: Future Value: The Future value is calculated using the cost of capital or interest rate prevailing…

Q: A popular energy provider has been closely monitoring grid demand and is concerned about strain from…

A: We will first have to determine the expected revenues for years 5-20 in this case.

Q: The management of a manufacturing company is planning to buy a new milling machine. The investment…

A: ERR is rate at which PV of cash outflows is equal to FV of cash inflows. In other words, rate at…

Q: A new high-efficiency motor is being considered for a large compressor. The new motor will cost…

A: Payback Period is the time duration taken to reap back the amount invested in the project. The…

Q: Pinto.com has developed a powerful new server that would be used for corporations’ Internet…

A: Given Pinto developed a server cost of manufacture- $25 Million working capital at the beginning…

Q: proposed to a young, start-up company. The Delta project will cost $150,000 to develop and is…

A: Solution:- Calculation of the payback period for each project as follows:- The following formula…

Q: a. Calculate the NPV. Suppose the plant can be sold for $150 million to another automaker if the…

A: NPV = (Successful Cash flow x Probability of Success) + (UnSuccessful Cash flow x Probability of…

Q: ou are considering opening a new plant. The plant will cost $104.1 million up front and will take…

A: Net present value and Internal rate of return are capital budgeting techniques used to evaluate…

Q: A group of venture investors is considering putting money into Lemma Books, which wants to produce…

A: BREAKEVEN POINTBreak Even means the volume of production or sales where there is no profit or…

Q: You are considering opening a new plant. The plant will cost $100.0 million upfront. After that, it…

A: NPV and IRR are both commonly used capital budgeting tools. NPV is the net present value used to…

Q: A company can buy one of five machines to increase its production. Considering that the useful life…

A: The IRR method is the method of finding out the profitability of the project by finding the…

Q: Blossom Manufacturing is considering the purchase of a new sewing machine that costs $23200. The…

A: Initial cost = $23,200 Annual saving = $4960 Salvage value = $3720 Required return = 12% Net…

Q: Tyler, Inc., is considering switching to a new production technology. The cost of the required…

A: IRR is the rate at which NPV is Zero.

Q: The TinX Corp. is investing in a machine which will increase the quality of their product. The…

A: Net present value (NPV) is the distinction between the current estimation of money inflows and the…

Q: Mr Dela Cruz is going to buy a new machine for manufacturing its product: Machine A has a first cost…

A: The net gain or loss of an investment over a specific time period, stated as a percentage of the…

Q: Suppose you have an internship at a chemical factory. Your supervisor asks you to calculate the net…

A: NPV is the difference between the present value of cash inflows and the present value of outflows. A…

Q: You are considering opening a new plant. The plant will cost $98.52 million up front and will take…

A: Net present value and Internal rate of return are capital budgeting techniques used to evaluate…

Q: You are considering opening a new plant. The plant will cost $103.7 million up front and will take…

A: Net present value and Internal rate of return are capital budgeting techniques used to evaluate…

Q: Fantastic Footwear can invest in one of two different automated clicker cutters. The first, A, has a…

A: The IRR of a project is used to measure the project’s profitability. It equates the NPV to zero to…

Q: How many of their products do they need to sell to break even financially?

A: To calculate the break-even point in units, you can use the following formula:

Q: You are considering opening a new plant. The plant will cost $98.2 million upfront. After that, it…

A: NPV and IRR are both commonly used capital budgeting tools. NPV is the net present value used to…

Q: A company that manufactures magnetic flow meters expects to undertake a project that will have the…

Q: The internal rate of return (IRR) is the discount rate that results in a net present value (NPV) of…

A: According to rule, because you have posted multiple questions, we will answer the First question…

Q: The firm is considering two machines: Machine A with initial investment of $10,000 and annual…

A: The company will invest in a project to earn return from the investment. If the company thinks that…

Q: Pinto.com has developed a powerful new server that would be used for corporations’ Internet…

A: The process through which an entity decides whether to opt for a particular investment or not is…

Q: Where does the opportunity cost should go when calculating the NPV of the project? is that in the…

A: Opportunity Cost is a loss of benefit when we choose one option over that other.

Q: Ignore income taxes in this problem.) Your Company is considering buying a new machine that would…

A: Maximum amount for the machine = annual cost savings x Present value factor (12%, 10 years)

Q: OptiLux is considering investing in an automated manufacturing system. The system requires an…

A: Net Present Value (NPV) :— It is the sum of present value of all cash flows. It is also calculated…

Q: Crow Corporation, a company that specializes in precision metal fabrication, is conducting a study…

A: Given information: Interest rate is 12% Number of years is 2 Cost is $260,000

Q: A project will increase revenue from $3.6 million to $4.4 million. Wages are 30% of revenue.…

A: The objective of this question is to calculate the incremental expenses that will result from…

Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

wallace inc is considering spending $100,000 for a new grinding machine. this amount could be invested to yield a 12% return. what is the opportunity cost?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Turner Printing is looking to invest in a printer, which costs $60,000. Turner expects a 15% rate of return on this printer investment. The company expects incremental revenues of $30,000 and incremental expenses of $15,000. There is no salvage value for the printer. What is the accounting rate of return (ARR) for this printer? Did it meet the hurdle rate of 15%?
Sunshine Smoothies Company (SSC) manufactures and distributes smoothies. It is considering the introduction of a "weight loss" smoothie. The project would require a $4 million investment outlay today (t = 0). The after-tax cash flows would depend on whether the weight loss smoothie is well received by consumers. There is a 30% chance that demand will be good, in which case the project will produce after-tax cash flows of $2 million at the end of each of the next 3 years. There is a 70% chance that demand will be poor, in which case the after-tax cash flows will be $1 million for 3 years. The project is riskier than the firm's other projects, so it has a WACC of 12%. The firm will know if the project is successful after receiving first year's cash flows. After receiving the first year's cash flows it will have the option to abandon the project. If the firm decides to abandon the project the company will not receive any cash flows after t = 1 , but it will be able to sell the assets…
Suppose Francine Dunkleberg's Sweets is considering investing in warehouse management software that costs $450,000, has $35,000 residual value, and should lead to cost savings of $130,000 per year for its five-year life. In calculating the ROR, which of the following figures should be used as the equation's denominator (average amount invested in the asset)? a) $485,000 b) $242,500 c) $207500 d)$225000
I need the answer as soon as possible
Dynamic is considering investing in a rooftop solar network to generate its own power. Any unused power will be sold back to the local utility company. Between cost savings and new revenues, the company expects to generate $1,560,000 per year in net cash inflows from the solar network installation. The solar network would cost $8.8 million and is expected to have a 18-year useful life with no residual value. Calculate (i) the internal rate of return (IRR) and (ii) the net present value (NPV) assuming the company uses a 12% hurdle rate. (i) Calculate the internal rate of return (IRR). Use technology to find this value. (Enter a percentage rounded to two decimal places, X.XX%.) IRR (as a percentage):
Webmasters.com has developed a powerful new server that would be used for corporations' Internet activities. It would cost $10 million at Year 0 to buy the equipment necessary to manufacture the server. The project would require net working capital at the beginning of each year in an amount equal to 10% of the year's projected sales; for example, NWC = 10% (Sales). The servers would sell for $24,000 per unit, and Webmasters believes that variable costs would amount to $17,500 per unit. After Year 1, the sales price and variable costs will increase at the inflation rate of 3%. The company's nonvariable costs would be $1 million at Year 1 and would increase with inflation. The server project would have a life of 4 years. If the project is undertaken, it must be continued for the entire 4 years. Also, the project's returns are expected to be highly correlated with returns on the firm's other assets. The firm believes it could sell 1,000 units per year. The equipment would be depreciated…
Cecil company is considering the of a new machine. The machine cost $227,500 and will generate a yearly cash inflow of $35,000. what is the payback period? Requirement: what is the payback period?
Dynamic is considering investing in a rooftop solar network to generate its own power. Any unused power will be sold back to the local utility company. Between cost savings and new revenues, the company expects to generate $1,460,000 per year in net cash inflows from the solar network installation. The solar network would cost $7.2 million and is expected to have a 18-year useful life with no residual value. Calculate (i) the internal rate of return (IRR) and (ii) the net present value (NPV) assuming the company uses a 13% hurdle rate. (i) Calculate the internal rate of return (IRR). Use technology to find this value. (Enter a percentage rounded to two decimal places, X.XX%.) The IRR is %.
3
After these previous calculations, the project still requires a big initial investment, and other options are being considered. We were considering adapting our production line, in order to produce some parts for electric automobiles, this way, and after analyzing the possible market opportunities, we could expect to obtain net revenues of $40,000 per month for at least the next 8 years. a) What is the maximum that we should invest on this project if we consider a cost of capital of 4%? b) If we ask for a loan of 2,000,000 at an annual interest rate of 2% compounded semiannually, to be paid in 8 years, how much would you have to pay every semester to cover the loan?
Fantastic Footwear can invest in one of two different automated clicker cutters. The first, A, has a $150,000 first cost. A similar one with many extra features, B has a $579,000 first cost. A will save $50,000 per year over the cutter currently in use. B will save $160,000 per year. Each clicker cutter will last five years. If the MARR is 8 percent, which alternative is better? Use an IBB comparison should be chosen percent. For the increment from cutter A to cutter B, the IRR is percent. Therefore, For the increment from the do-nothing alternative to cutter A. the IRR is (Type integers or decimals rounded to one decimal place as needed.)
You are evaluating a 20 year project. Using a discount rate of 10%, you have calculated the project's NPV as $200. Part 1 After completing your project estimation, the sales group of another division in the company notes that your project will probably cannibalize the sales of their products. They estimate that their after-tax profits will decrease by $27 per year for the 20-year life of the project. What is the new NPV of your project after taking this into account?