57,000 units per year at a price of RM82. What is the highest variable cost that will allow the firm to at least break even on this project?
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- QUESTION 1 Agro Tech Corporation is considering investing in a new IT system for selling to its clients. The company has identified two new possible systems, which would be suitable for its customers. Only one of the systems can be selected and the directors are looking for guidance on which system would be the best. The company requires a 15% rate of return on projects of this nature. The installation cost per project will be R100 000 each, while systems can be disposed for R200 000 each after five- years life span. Cash flows for Agro Tech Corporation: IT System (Rands) PERIOD 1 2 3 4 5 SYSTEM A -4 000 000 R1 800 000 R1 700 000 R1 600 000 R1 500 000 R1 400 000 SYSTEM B -3 500 000 1 500 000 1 500 000 1 500 000 1 400 000 R1 300 000 Required: 1.1 Determine the payback period in years, months and days for both systems 1.2 Based on your calculations in 1.1, which system should Agro Tech Corporation consider? Why? 1.3 Calculate the Net Present Value for both systems. 1.4 Calculate the…Question 7 A company can invest in two alternatives: Machine Eco and Machine Top. The controlling department provides the following data. Eco total annual costs annual sales 3.600.000,00 € 4.000.000,00 € 3.000.000,00 € € 8 purchasing price machine residual value useful life (years) The cost of capital are 10%. How would you decide using the • profit comparison calculation and the profitability comparison? When will the machines be amortized? Question 8 Top 3.700.000,00 € 4.200.000,00 € 4.500.000,00 € € 8 Please refer to question no. 7. What would be the results Eco had a residual value of € 500.000,-- and Top of € 600.000,--?Question 1 Gerhana company is considering two mutually exclusive projects, X and Y. Project X costs 120,000 and is expected to generate RM65,000 in year one and RM75,000 in year two. Project Y costs RM190,000 and is expected to generate RM64,000 in year one, RM67,000 in year two, RM56,000 in year three, and RM45,000 in year four. The firm's required rate of return for these projects is 10%. i) For each project, draw a timeline that shows cash flow spent or received during the projects lives. ii) What is the net present value (NPV) for Project X and Y? iii) Compute profitability index for Project X and Y? iv) Based on your answer, which project should you select. Justify your answer.
- Marmalade Berhad projects unit sales with a new machine as follows: Year Unit Sales 1 20,000 2 30,000 3 40,000 4 50,000 5 60,000 The new machine will cost RM300,000 plus RM5,000 for transportation. It also requires an increase in net working capital of RM40,000 to start. Total fixed costs are RM200,000 per year, variable production costs are RM15 per unit, and the units are priced at RM40 each. The machine has an installation cost of RMIO,OOO and will depreciate using straight line method over the next five years. In the fifth year, this machine can be sold for about 20% of its acquisition cost. The company tax rate is 24% and has a required rate on all its projects of 10%. Required: a) Calculate the Net Present Value (NPV) if Marmalade Berhad decided to buy the new machine. Should the firm buy the new machine? b) Explain sunk cost in the context of capital budgeting. (20 Marks) (5 Marks)Average rate of returnnew product Hana Inc. is considering an investment in new equipment that will be used to manufacture a smart-phone. The phone is expected to generate additional annual sales of 10,000 units at 300 per unit. The equipment has a cost of 4,500,000, residual value of 500,000, and a 10-year life. The equipment can only be used to manufacture the phone. The cost to manufacture the phone follows: Determine the average rate of return on the equipment.Flanders Manufacturing is considering purchasing a new machine that will reduce variable costs per part produced by $0.15. The machine will increase fixed costs by $18,250 per year. The information they will use to consider these changes is shown here.
- Problem:15 Engine valves company is considering building an assembly plant .The decision has been narrowed down to two possibilities. The company desires to choose the best plant at a level of operation of 10,000 gadgets a month. Both plants have an expected life of 10 years and are expected to have any salvage value at the time of their retirements .The cost of capital is 10 percent . Assuming a zero income tax rate , suggest what would be the desirable choice ? Cost of the monthly output of 10,000 valves Large Plant Rs Small plant Rs Initial cost 30,00,000 22,93,500 Direct labour : First shift 15,00,000 per year 7,80,000 per year Second shift 9.00,000 per year Overheads 2,40,000 per year 2,10,000 per year4.12 ugnso eniraer ah ho Octagon Company is considering introducing a new video camera. Its selling price is projected to be P1,000 per unit. Variable manufacturing costs are estimated to be P450 per unit The company expects the annual fixed manufacturing costs for the new camera to be P3,500.00 per year if its annual sales do not exceed the current regular shift capacity of 12,000 cameras and P6,000,000 otherwise. Sales commissions are paid at 5% of sales. The company also plans to spend P1,000,000 per year on advertising. exod 000,08 aleo Instructions: 000,81 1. Determine the contribution margin per unit. 2. Determine the two break even points in terms of number of cameras sold month. 3. Suppose a market research survey indicates that a 10% reduction in the selling price wil lead to a 20% increase in sales. Should the company reduce the price by 10%? per Fobcoru coer bet pox2. Cambridge Manufacturing is evaluating the introduction of a new product that would have a unit selling price of RM100. The fixed costs are estimated to be RM320 and the unit variable costs are projected at RM60. What sales volume (in units) is required to break even? Find the total variable costs. (5 marks)
- Find break-even point where a manager has determined that a potential new product can be sold at a price of 30.00 each. The cost to produce the product is 22.50, but the equipment necessary for production must be leased for 125,000 per year. Explain sunk cost and state any 3 examples?#34 to decide is you and trying of investment are worth while, compare Alternative: A > Incremental analysis (Alternative B соmраnу More than 2 alternatives if the additional increment pairs B wins then B vs C C A MARR Company at considering 2 different machines at 12% Both life spons = 10 years м/с X м/с у Initial Cost 160000 285000 Annual Operating Cost 45000 45000 Benefits per year. Salvage 90000 105000 Value 20000 40000A proposed project has fixed costs of $7,400, depreciation expense of $1,320, and a sales quantity of 1,600 units. The total variable costs are $5,607. What is the contribution margin per unit if the projected level of sales is the accounting break-even point? Question 10 options: $6.28 $4.63 $5.45 $5.16 $8.13
