What is net present value if brisbane replace current system

Reference no: EM131006997

The Brisbane Manufacturing Company produces a single model of a CD player. Each player is sold $210 with a resulting contribution margin of $80.

Brisbane's management is considering a change in its quality control system. Currently, Brisbane spends $40,500 a year to inspect the CD players. An average of 2,100 units turns out to be defective - 1,470 of them are detected In the Inspection process and are repaired for $85. If a defective CD player is not identified in the inspection process, the customer who receives it is given a full refund of the purchase price. Competitors are expected to improve their quality control systems in the future, so if Brisbane does not improve its system, sales volume is expected to fall by 960 CD players a year for the next four years. In other words, It will fall by 960 units in the first year, 920 units in the second year..

The proposed quality control system involves the purchase of an x-ray machine for $280,000. The machine would last for four years and would have salvage value at that time of $21,000. Brisbane would also spend $820,000 immediately to train workers to better detect and repair defective units. Annual inspection costs would Increase by $25,000. This new control system would reduce the number of defective units to 350 per year. 290 of these defective units would detected and repaired at a cost of $50 per unit. Customers who still received defective players would be given a refund equal to one-and-a-fourth times the purchase price.

Questions 1 and 2

1. What Is the Year 2 cash flow if Brisbane keeps using its current system?

2. What Is the Year 2 cash flow if Brisbane replaces current system?

Questions 3 and 4

3. Assuming a discount rate of 6%, what is the net present value if Brisbane keeps using its current system?

4. Assuming a discount rate of 6%, what is the net present value if Brisbane replaces its current system?

Reference no: EM131006997

Questions Cloud

Company makes no deposits during the subsequent five year : A company deposits $2000 in a bank at the end of every year for 10 years. The company makes no deposits during the subsequent 5 years. If the bank pays 8% interest, how much would be in the account at the end of 15 years?

Find the centre of mass of the solid bounded : Find the centre of mass of the solid bounded by the cone z2 = X2 + y2 and above by the sphere X2 + y2 + z2 = 2az and whose density is kz.

What is the axis and what is the density of the solid : If we want to interpret the given integral as the moment of inertia of a solid about some axis, what is the axis and what is the density of the solid?

A project''s npv increases as the wacc declines : Cyberhost Corporation's sales were $225 million last year. If sales grow at 6% per year, how large (in millions) will they be 5 years later?

What is net present value if brisbane replace current system : What Is the Year 2 cash flow if Brisbane keeps using its current system - what Is the Year 2 cash flow if Brisbane replaces current system and what is the net present value if Brisbane replaces its current system?

Problem regarding the duplicate frame numbers : (a) Set up a spreadsheet of frame numbers for these customers with the heading: FRAME NUMBERS. (b) Then, create a separate column to the right of these frame numbers which duplicates these frame numbers with the title: Duplicate frame numbers.

How do professional women overcome barriers : What barriers, if any, did you experience while pursuing positions of authority within your non-profit organization? How do professional women overcome barriers while pursuing leadership positions within non-profit organizations?

Complete those steps can speed up innovation : Imagine Dow Chemical is conducting a situational analysis. According to its sales, Dow is the second largest chemical company in the world.

When is the particle moving in the positive direction : When is the particle moving in the positive direction? (Enter your answer using interval notation.) Find the total distance traveled during the first 6 s. ft Find the acceleration at time t (in ft/s2).

User Account

All Pages