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The production manager and manufacturing engineer in the assembly department of WM3 ’s facility in Tennessee have designed a new assembly fixture. The fixture will reduce the assembly time of a product from 38 minutes to 20 minutes per unit, saving $16.84 per unit in direct labor. The fixture will cost $200,000 to fabricate and can be ready by December 31, 2017 (assume the fixture is paid only when it is ready). The fixture will have a six year useful life if properly maintained. Its salvage value will be negligible, as its general usefulness is limited. In figuring the cost savings, the production manager points out that $88 of overhead is charged for each hour of direct labor. The manufacturing engineer points out that in this overhead charge are the fringe benefits and other payroll-related costs of 38.5%, which are incurred for each hour of direct labor, and that these costs are expected to increase by 1.5% per year. The other 61.5% of overhead charges account for other overhead expenses, which are expected to increase by 4.5% per year. The new operation will require an additional 100 ft2 of floor space. The space is available in an adjacent department, which recently reduced its requirements when it did a similar project. The assembly department will pay $15 annually per ft2 in the first year (2018). This cost is expected to increase at a general inflation rate of 2.5% per year for the next five years. The product will have a demand of 2,500 units the first year (2018). There is some uncertainty on the demand over the next five years. Marketing believes that there is a 35% chance that demand will increase by 500 units per year until 2023. There is a 45% chance that demand will remain constant at 2,500 units until 2023. There is also a 20% chance that demand will be 1,500 units for the next two years and 1,000 for the next three years.
-You must perform an after-tax analysis. Let MARR be 15% and tax rate be 34%. You can use any analysis method you want (PW, EUAW, ΔIRR, ΔB/C), but be careful with the difference in useful life of each option.
Former President Bill Clinton reportedly was paid an advance of 15.0 million to write his book "My Life." The book took three years to write. In the time he spent writing, Clinton could have been paid to make speeches. What is the NPV of agreeing to ..
The number of new shares that Kinston must issue to raise the capital needed to pay its debt obligation is closest to:
An Italian company is considering expanding the sales of its cappuccino machines to the U.S. market. As a result, the idea of setting up a manufacturing facility in the U.S. should be explored. Calculate the PV of interest tax shield from non-concess..
A firm pays a current dividend of $2, which is expected to grow at a rate of 8% indefinitely. If the current value of the firm’s shares is $54, what is the required return applicable to the investment based on the constant-growth dividend discount mo..
Tanghshan Mining has 100,000 shares outstanding and just declared a 3 for 2 stock split. Before the announcement, the firm's shares were trading at $50.00 per share. After the stock divided, the firm's shares should trade at ________ per share.
A project has the following estimated data: price = $59 per unit; variable costs = $31.86 per unit; fixed costs = $7,200; required return = 14 percent; initial investment = $11,000; life = three years. Ignore the effect of taxes. What is the accounti..
Cooling Tools, Inc. is currently producing 978 of small refrigerators per month but the company’s CEO plans to increase production at a rate of 7.60 percent per month until the firm is producing 5,555 of refrigerators per month. How many months will ..
The master budget includes all of the following except. A formal written statement of management’s plans for a specified future time period, expressed in financial terms is a(n). All of the following are financial budgets except the. The master budge..
find the value of the bond with? (1)15years, (2) 12? years, (3) 9? years, (4) 6? years, (5) 3? years, (6) 1 year to maturity.
You are the assistant director of the hospital medical staff office at The Rural Outreach Community Hospital in a tiny town in Arkansas. It is your job to verify physician credentials for staff privileges. Your hospital receives an application from a..
what is Diving s cost of equity capital?
Find the present values of these ordinary annuities. Discounting occurs once a year. a. $400 per year for 10 years at 10%.
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