Solution-Managerial finance function and economic value

Managerial finance function and economic value added

Reference no: EM132013400

The managerial finance function and economic value added (EVA). Ken Allen, capital budgeting analyst for Bally Gears, Inc., has been asked to evaluate a proposal. The manager of the automotive division believes that replacing the robotics used on the heavy truck gear line will produce total benefits of $560,000 (in today's dollars) over the next 5 years. The existing robotics would produce benefits of $400,000 (also in today's dollars) over that same time period. An initial cash investment of $220,000 would be required to install the new equipment. The manager estimates that the existing robotics can be sold for $70,000. Show how Ken will apply marginal analysis techniques to determine the following:

The marginal (added) benefits of the proposal new robotics.
The marginal (added) cost of the proposed new robotics.
The net benefit of the proposed new robotics.
What should Ken Allen recommend that the company do? Why?
What factors besides the costs and benefits should be considered before the final decision is made?

Reference no: EM132013400

Questions Cloud

Emphyrio component cost of a new equity issue : Emphyrio's current stock price is 62, and it expects to pay a dividend of 0.25 at the end of the year. What is Emphyrio's component cost of a new equity issue?

What is its component cost of preferred stock : Ebeling Inc. has a perpetual preferred stock dividend of 1.55 per quarter and its current stock price is 96. What is its component cost of preferred stock?

What is the mechanism of action of prednisone : A 50 year old woman has had rheumatoid arthritis for 3 years and has been taking multiple NSAID's. She has taken corticosteroids a few times during flare ups.

Compute her adjusted gross income : In addition, Frazier had a net loss of $18,000 from her real estate rentals (where she was an active participant). Compute her adjusted gross income

Managerial finance function and economic value added : Ken Allen, capital budgeting analyst for Bally Gears, Inc., has been asked to evaluate a proposal. The manager of the automotive division believes

Calculate the company income taxes : Calculate the company's income taxes. What is the average tax rate? What is the marginal tax rate?

Was your member in support or in opposition to the ahca : Was your member in support or in opposition to the AHCA? State three points that you would cover in support or opposition to your representative's position.

What is the component cost of debt : Mike Pub are trading at their par value of $,1000 and pay interest 1 times a year. If each interest payment is 11 what is the component cost of debt?

What is the markup on variable costs needed to break even : Nana Company has the following budgeted costs for 10,000 units: What is the markup on variable costs needed to break even

User Account

All Pages

Managerial finance function and economic value added

Reference no: EM132013400

Reference no: EM132013400

Questions Cloud

Reviews

Write a Review

Finance Basics Questions & Answers

Financial reporting and analysis

A report on financial accounting

Describe the types of financial ratios

Differences between sole proprietorship and corporation

Prepare a cash budget statement

What are the implied interest rates

State pricing theory and no-arbitrage pricing theory

Small business administration

Effect of financial leverage

Evaluate the basis for the payment to the lender

Importance of opps, ipps, mpfs and dmepos

Time value of money

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT