Do you think the company should purchase the new line

Assignment Help Business Economics
Reference no: EM132256479

You are the manager of a local factory that produces plastic bottles for soft drink manufacturers. Your colleague brings an assembly line project to a meeting with the following data:  

Estimated life of assembly line:                     5 years

Initial investment cost:                                  $740,000

Estimated salvage value:                               none

Current interest rates:                                    15 percent

Estimated Cash Flow Analysis

Year                                      Expected Cash Flow

1                                             $360,000

2                                             240,000

3                                             100,000

4                                               25,000

5                                               20,000

a) As your colleague begins going through the analysis with the CEO, you wait until he pauses and state, "I can tell already this is not an investment we should pursue."  Your colleague asks how you could possible know that from looking at the data for one minute. How DO you know?

b) Suppose you are given the same assembly line data, but now interest rates have fallen to 0.05 percent. Do you think the company should purchase the new line? How can you know that for certain?

Reference no: EM132256479

Questions Cloud

Integrated marketing communication plan : Many companies use what is called an Integrated Marketing Communication Plan. Describe how you would use a direct mail campaign.
Calculate the accounting profit to show the cfo : The accounting department at Frosty Cola has worked up the following figures for the year:
Responsiveness of frosty cola to its own price : a) What can you conclude about the responsiveness of Frosty Cola to its own price? How do you know
Discuss the impact of capital structure on earning capacity : In this assignment, discuss the impact of capital structure on the earning capacity of the companies, listed in Muscat Securities Market
Do you think the company should purchase the new line : Do you think the company should purchase the new line? How can you know that for certain?
Productivity of the company : Frosty Cola's chief operating officer is very interested in finding out about the average productivity of the company's workers.
The foundation of the american criminal justice system : Explain one social and one political influence these crimes and punishments had on the current U.S. criminal justice system.
Summarize plato various levels of reality : Compare and contrast Plato's theory of Forms with metaphysical beliefs of Taoism. Be sure to summarize Plato's various levels of reality and Taoism's Yin-Yang.
How can we characterize phil preferences : However, when faced with junk food, Phil has trouble refusing. How can we characterize Phil's preferences?

Reviews

Write a Review

Business Economics Questions & Answers

  Percentage of seats must be filled for the flight to break

Southwest Airlines flies nonstop between Tampa and Albuquerque with 137-passenger planes. Considering all the costs of owning each plane plus

  Qwhat is the relationship between states that have stricter

q.what is the relationship between states that have stricter gun control laws and the crime rate?you will need to

  Find the mean and standard deviation of the distribution

(a). If the sample size is n =64, find the mean and standard deviation of the distribution of sample means.

  Potential costs and benefits of placing substantial

List the potential costs and benefits of placing a substantial percentage of pay at risk for all employees in the following types of organizations: a hospital, a restaurant, a brokerage firm, and a fashion design house.

  Compute the lerner index for the monopoly described

What is the resulting deadweight loss relative to the competitive outcome. Compute the Lerner Index for the monopoly described in the question above.

  What is the set of rationalizable strategies

Consider a duopoly game in which two firms simultaneously and independently select prices. Assume that prices cannot be negative. Let p1 denote the price set by firm 1 and p2 let the price set by firm 2. Unlike Bertrand competition (see Chapter 10), ..

  Depreciation using the units of production method

You purchase a residential home in July 10th 2013 that you are going to use as a rental property. You paid $250,000 and the land was valued at $50,000. What is your allowable TAX depreciation for 2013. You purchase a dump truck for $75,000 that you e..

  Find the optimal capital and labor inputs

Find the optimal capital and labor inputs given the production function f (k, l) = ak + bl and that the output price is given by p, the rental price of capital is r and w is the wage.

  Calculate the gains from trade

Consider two neighboring island countries called Contente and Felicidad. They each have 4 million labor hours available per week that they can use to produce jeans, rye, or a combination of both. Calculate the gains from trade—that is, the amount by ..

  Consider a homogeneous product industry with inverse market

consider a homogeneous product industry with inverse market demand given by p 1100 - 2q there is currently one

  Which treatment generates the greatest health gains

You are a member of an area prescribing committee (APC) which is reviewing the treatment options for a cancer which is universally rapidly fatal (usually within months) if not treated. From a society perspective, which treatment generates the greates..

  What happens to the price of coffee and thomas income

What happens to the price of coffee and Thomas's income. I would like to know the thinking steps in detail, best regards.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd