please solve in a step by step solution Acme Semiconductor is expanding its facility and needs to add equipment. There are three processtools under consideration. You have been asked to perform and economic analysis to select themost appropriate tool to acquire. You have gathered the following information for evaluation. Eachof these tools has a useful life of seven years. Acme's accounting staff has established a company-wide MARR of 8% per year. Which of the process tools should be selected?Tool AP55,000,000P6,250,000P18,250,000P18,000,00015.9%Tool BTool CInvestment CostsAnnual ExpensesP45,000,000P8,550,000P16,750,000P3,750,0007.9%P80,000,000P3,200,000P20,200,000P22,000,00014.6%Annual RevenuesMarket ValueIRR

MARR = 8% Cash Flows: Year Cash Flow - Tool A Cash Flow - Tool B Cash Flow - Tool C Reference…

Answered: Acme Semiconductor is expanding its…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 18P

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The Mechanical Components Division manager asks you to recommend a make/buy decision on a major automotive subassembly that is currently purchased externally for a total of $3.9 million this year. This cost is expected to continue rising at a rate of $300,000 per year. Your manager asks that both direct and indirect costs be included when in-house manufacturing (make alternative) is evaluated. New equipment will cost $3 million, have a salvage of $0.5 million and a life of 6 years. Estimates of materials, labor costs, and other direct costs are $1.5 million, per year. Typical indirect rates, bases, and expected usage are shown. Perform the AW evaluation at MARR = 12% per year over a 6-year study period. Show both hand and spreadsheet solutions. Department Basis Rate Expected Usage X Direct labor cost $2.40 per $ $450,000 Y Materials cost $0.50 per $ $850,000 Z Number of inspections $20 per inspection $4,500
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Acme Semiconductor is expanding its facility and needs to add equipment. There are three process tools under consideration. You have been asked to perform an economic analysis to select the most appropriate tool to acquire. You have gathered the following information for evaluation. Each of these tools has a useful life of seven years. Acme’s accounting staff has established a company-wide MARR of 8% per year.Which one of the process tools should be selected?
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The Mechanical Components Division manager asks you to recommend a make/buy decision on a major automotive subassembly that is currently purchased externally for a total of $3.9 million this year. This cost is expected to continue rising at a rate of $300,000 per year. Your manager asks that both direct and indirect costs be included when in-house manufacturing (make alternative) is evaluated. New equipment will cost $3.2 million, have a salvage of $0.5 million and a life of 6 years. Estimates of materials, labor costs, and other direct costs are $2.3 million, per year. Typical indirect rates, bases, and expected usage are shown. Perform the AW evaluation at MARR = 12% per year over a 6-year study period. Basis Direct labor cost Department X Y Z Rate $2.35 per dollar $0.50 per dollar $20 per inspection Materials cost Number of inspections The annual worth for the make decision is $ The annual worth for the buy decision is $ The (Click to select) ✓ alternative is selected. (Click to…
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A piece of new equipment has been proposed by engineers to increase the productivity of a certain manual welding operation. The investment cost is $23522 and the equipment will have a market value of $6723 at the end of a study period of five years. Increased productivity attributable to the equipment will amount to $9350 per year after extra operating costs have been subtracted from the revenue generated by the additional production. If the firm's MARR is 20% per year, What is the Present Worth (PW) for this proposal?
Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a five-year period. His annual pay raises are determined by his division’s return on investment (ROI), which has exceeded 18% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Product A Product B Initial Investment Cost of equipment (salvage value) 170000 380000 Annual revenues and costs Sales revenue 250000 350000 Variable expenses 120000 170000 Depreciation expense 34000 76000 Fixed out-of-pocket operating costs 70000 50000 The company’s discount rate is 16%. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor using tables. Required: 1. Calculate the payback period for each product. 2. Calculate the net present value for each product. 3. Calculate the internal rate of return for each product. 4. Calculate the project…
Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a five-year period. His annual pay raises are determined by his division's return on investment (ROI), which has exceeded 20% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Product A Product B Initial investment: Cost of equipment (zero salvage value) Annual revenues and costs: $250,000 $. 460,000 $300,000 $400,000 Sales revenues 190,000 $ 140,000 $ 39,000 Variable expenses $ 81,000 Depreciation expense Fixed out-of-pocket operating $ 75,000 $55,000 costs The company's discount rate is 18%. Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor using tables. Required: Calculate the payback period for each product. (Round your answers to 2 decimal 1. places.) Product A Product B Payback period 2.94 years 2.97 years
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