Wilson Partners manufactures thermocouples for remote temperature monitoring of electronics applications. The current system has a fixed cost of $400,000 per year and a variable cost of $10 per unit. Wilson sells the units for $14 each. A newly proposed system will add on-board features that allow the revenue to increase to $16 per unit, but the fixed cost will now be $600,000 per year. The variable cost of the new system will be based on a $48 per hour rate with 0.2 hour dedicated to produce each unit Plot the two profit relations and estimate graphically the breakeven quantity between the current and proposed systems. Comment on your estimate.

Veer

Beryl's Iced Tea currently rents a bottling machine for $52,000 per year, including all maintenance expenses. It is considering purchasing a machine instead and is comparing two options: a. Purchase the machine it is currently renting for $150,000. This machine will require $25,000 per year in ongoing maintenance expenses. b. Purchase a new, more advanced machine for $250,000. This machine will require $16,000 per year in ongoing maintenance expenses and will lower bottling costs by $11,000 per year. Also, $39,000 will be spent up front to train the new operators of the machine. Suppose the appropriate discount rate is 7% per year and the machine is purchased today. Maintenance and bottling costs are paid at the end of each year, as is the cost of the rental machine. Assume also that the machines will be depreciated via the straight-line method over seven years and that they have a 10-year life with a negligible salvage value. The marginal corporate tax rate is 20%. Should Beryl's Iced…

United Pigpen (UP) is considering a proposal to manufacture high protein hog feed. The project would make use of an existing warehouse, which is currently rented out to a neighboring firm. The next year’s rental charge on the warehouse is $260,000, and thereafter the rent is expected to grow in line with inflation at 4% a year. In addition to using the warehouse, the proposal envisages an investment in plant and equipment of $3.1 million. This could be depreciated for tax purposes over 10 years. However, UP expects to terminate the project at the end of eight years and to resell the plant and equipment in year 8 for $1,040,000. Finally, the project requires an initial investment in working capital of $910,000. Thereafter, working capital is forecasted to be 10% of sales in each of years 1 through 7. Year 1 sales of hog feed are expected to be $10.9 million, and thereafter sales are forecasted to grow by 5% a year, slightly faster than the inflation rate. Manufacturing costs are…

The initial cost of one customized machine is $675,000 with an annual operating cost of $14,800, and a life of 4 years. The machine will be worthless and replaced at the end of its life. What is the equivalent annual cost of this machine if the required rate of return is 14.5 percent and we ignore taxes? USING EXCEL FORMULAS

Beryl's Iced Tea currently rents a bottling machine for $55,000 per year, including all maintenance expenses. It is considering purchasing a machine instead, and is comparing two options: a. Purchase the machine it is currently renting for $160,000. This machine will require $23,000 per year in ongoing maintenance expenses. b. Purchase a new, more advanced machine for $250,000. This machine will require $15,000 per year in ongoing maintenance expenses and will lower bottling costs by $12,000 per year. Also, $39,000 will be spent upfront training the new operators of the machine. Suppose the appropriate discount rate is 8% per year and the machine is purchased today. Maintenance and bottling costs are paid at the end of each year, as is the rental of the machine. Assume also that the machines will be depreciated via the straight-line method over seven years and that they have a ten-year life with a negligible salvage value. The corporate tax rate is 20%. Should Beryl's Iced Tea continue…

Jax Inc is considering the purchase of a new machine for the production of computers.  Machine A costs $7,000,000 and will last for six years.  Variable costs are 25% of sales, and fixed costs are $500,000 annually.  Machine B costs $10,000,000 and will last for ten years.  Variable costs for the machine are 15% of sales, and fixed costs are $750,000 annually.  The sales for each machine will be $4,000,000 per year.  The required rate of return is 9%, the tax rate is 21%, and both machines will be depreciated using straight-line depreciation with no salvage value. Calculate the equivalent annual annuity for Machine B. (Round to 2 decimals) What is the Net Present Value for Machine B? (round to 2 decimals)

Shue Music Company is considering the sale of a new sound board used in recording studios. The new board would sell for $24,700, and the company expects to sell 1,640 per year. The company currently sells 1,990 units of its existing model per year. If the new model is introduced, sales of the existing model will fall to 1,660 units per year. The old board retails for $23,100. Variable costs are 53 percent of sales, depreciation on the equipment to produce the new board will be $1,035,000 per year, and fixed costs are $3,250,000 per year. If the tax rate is 24 percent, what is the annual OCF for the project? Note: Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32. OCF

Beryl's Iced Tea currently rents a bottling machine for $50,000 per year, including all maintenance expenses. It is considering purchasing a machine instead and is comparing two options: a. Purchase the machine it is currently renting for $155,000. This machine will require $23,000 per year in ongoing maintenance expenses. b. Purchase a new, more advanced machine for $260,000. This machine will require $17,000 per year in ongoing maintenance expenses and will lower bottling costs by $14,000 per year. Also, $36,000 will be spent up front to train the new operators of the machine. Suppose the appropriate discount rate is 9% per year and the machine is purchased today. Maintenance and bottling costs are paid at the end of each year, as is the cost of the rental machine. Assume also that the machines will be depreciated via the straight-line method over seven years and that they have a 10-year life with a negligible salvage value. The marginal corporate tax rate is 20%. Should Beryl's Iced…

Shue Music Company is considering the sale of a new sound board used in recording studios. The new board would sell for $24,100, and the company expects to sell 1,580 per year. The company currently sells 1,930 units of its existing model per year. If the new model is introduced, sales of the existing model will fall to 1,600 units per year. The old board retails for $22,500. Variable costs are 53 percent of sales, depreciation on the equipment to produce the new board will be $1,395,000 per year, and fixed costs are $3,100,000 per year. If the tax rate is 23 percent, what is the annual OCF for the project? Note: Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32. OCF