ZuoTi.Pro
Question

Assume you are considering buying a machine to increase production and sales of a certain product....

Assume you are considering buying a machine to increase production and sales of a certain product. Which of the following effects should NOT be considered in the capital budgeting analysis?

a.) Last year a marketing consulting firm charged you $500,000 to forecast future sales of your product.

b.) Increased sales of this product will cause a reduction in sales in another one of your firm's products.

c.) The money invested in this machine could alternatively be used to do research and development of a new product, so if you buy the machine, you will not be able to build and market this new product.

d.) The machine requires an additional investment for its installation, and it would require an increase in NOWC.

e.) All of these effects have to be considered.

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Ans a.) Last year a marketing consulting firm charged you $500,000 to forecast future sales of your product.

Last year a marketing consulting firm charged you $500,000 to forecast future sales of your product. This should NOT be considered in the capital budgeting analysis.

0 0
Add a comment
Know the answer?
Add Answer to:
Assume you are considering buying a machine to increase production and sales of a certain product....
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • 1) Suppose that you calculate the NPV of a project, and obtain a value of $100...

    1) Suppose that you calculate the NPV of a project, and obtain a value of $100 million dollars. After completing your analysis, you find out that the corporate tax rate will change from 40% to 30%. If nothing else changes, what is the effect of this tax change on the NPV you had calculated? Assume that your company has no debt. a) The new NPV will be lower than $100 b) The new NPV will be higher than $100 c)...

  • 930 The directors of Silberman Ltd are considering a proposal for a new machine that is...

    930 The directors of Silberman Ltd are considering a proposal for a new machine that is estimated to cost £2,500,000. This would enable the company to manufacture a superior, additional new product, product Z. The accountant has prepared the following profit forecast on the assumption that the funds will be borrowed and the loan repaid at the end of the project: Profit forecast Year 1 Year 2 Year 3 Year 4 £000 £000 £000 £000 Sales 3.125 3.750 5,000 6.250...

  • Your company plans to produce a product for two more years and then to shut down production. You are considering replacing an old machine used in production with a new machine. The Old machine origina...

    Your company plans to produce a product for two more years and then to shut down production. You are considering replacing an old machine used in production with a new machine. The Old machine originally cost $ 717 and was bought Three (3) years ago (i.e. it has depreciated for three years). It could be sold today for $ 255 or sold in two years for $ 162 . The New machine would cost $ 786 and could be sold...

  • 3.0 Absolute Return The company Derabel, S.A. is considering buying a new machine for its production...

    3.0 Absolute Return The company Derabel, S.A. is considering buying a new machine for its production process. This project means an initial cost of € 200,000 and the machine is estimated to have a useful life of 5 years. The maximum productive capacity of the machine is 200,000 units per year. However, the first year it is expected that the activity will be 70% of the maximum installed capacity, reaching 100% from the second year. During the first year, the...

  • C7.61   Castle Company is considering the purchase of a new machine. The invoice price of the...

    C7.61   Castle Company is considering the purchase of a new machine. The invoice price of the machine is $150,000, freight charges are estimated to be $6,000, and installation costs are expected to be $4,000. The salvage value of the new equipment is expected to be zero after a useful life of four years. The company could retain the existing equipment and use it for an additional four years if it doesn't purchase the new machine. At that time, the equipment's...

  • Marinis Corporation is considering buying a brand new machine and has gathered the following data: Investment...

    Marinis Corporation is considering buying a brand new machine and has gathered the following data: Investment Estimated te Estimated annual cash inflows Estimated annual cash outflows $104,100 5 years $29,500 $10,300 Salvage value for the machine is estimated to be zero. Click here to view PV table. Your answer is partially correct. Try again. Calculate the net present value of the machine assuming a 6% discount rate. (If the net present value is negative, use either a negative sign preceding...

  • NexxGen is a Pharmaceutical Company which is considering investing in a new production line of portable...

    NexxGen is a Pharmaceutical Company which is considering investing in a new production line of portable electrocardiogram (ECG) machines for its clients who suffer from cardiovascular diseases. The company has to invest in equipment which costs $2,500,000 and falls within a MARCS depreciation of 5 years, and is expected to have a scrap value of $200,000 at the end of the project. Other than the equipment, the company needs to increase its cash and cash equivalents by $100,000, increase the...

  • Billingham Packaging is considering expanding its production capacity by purchasing a new machine, the XC-750. The...

    Billingham Packaging is considering expanding its production capacity by purchasing a new machine, the XC-750. The cost of the XC-750 is $2.69 million. Unfortunately, installing this machine will take several months and will partially disrupt production. The firm has just completed a $46,000 feasibility study to analyze the decision to buy the XC-750, resulting in the following estimates: • Marketing: Once the XC-750 is operational next year, the extra capacity is expected to generate $10.00 million per year in additional...

  • Billingham Packaging is considering expanding its production capacity by purchasing a new machine, the XC-750. The...

    Billingham Packaging is considering expanding its production capacity by purchasing a new machine, the XC-750. The cost of the XC-750 is $2.85 million. Unfortunately, installing this machine will take several months and will partially disrupt production. The firm has just completed a $46,000 feasibility study to analyze the decision to buy the XC-750, resulting in the following estimates: • Marketing: Once the XC-750 is operational next year, the extra capacity is expected to generate $10.20 million per year in additional...

  • You must evaluate a proposal to buy a new milling machine. The purchase price of the...

    You must evaluate a proposal to buy a new milling machine. The purchase price of the milling machine, including shipping and installation costs, is $198,000, and the equipment will be fully depreciated at the time of purchase. The machine would be sold after 3 years for $127,000. The machine would require a $3,500 increase in net operating working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $54,000...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT