Homework Answers
Factor affecting recomendation of payback periods decission
1. Provides the rough measures of liquidity and risk in project.
2. consider the payback period are not consider all the inflows of the company, it will not take the after payback period inflows
3. it ignores the time value of money and the cash flow without consider of timing
4. payback period are not measure the profitablity of the company.
5. the project with the shorter payback period is more risky then the longer payback period.
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Problem 2: The management of Tech21 Inc. wants to reduce its labor cost by installing a...
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Joanette, Inc., is considering the purchase of a machine that would cost $570,000 and would last...
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the purchase of a machine that would cost $570,000 and would last
for 9 years, at the end of which, the machine would have a salvage
value of $57,000. The machine would reduce labor and other costs by
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needed immediately, all of which would be recovered at the end of 9
years. The company requires a minimum pretax return of 18% on all
investment projects. (Ignore...
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years, whereas the standard machine will cost ₹ 2,00,000 with an
estimated life of 10 year. Both machine have no residual value.
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Joanette, Inc., is considering
the purchase of a machine that would cost $570,000 and would last
for 9 years, at the end of which, the machine would have a salvage
value of $57,000. The machine would reduce labor and other costs by
$117,000 per year. Additional working capital of $3,000 would be
needed immediately, all of which would be recovered at the end of 9
years. The company requires a minimum pretax return of 18% on all
investment projects. (Ignore...
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A piece of labor-saving equipment has just come onto the market that Mitsui Electronics, Ltd., could use to reduce costs in one of its plants in Japan. Relevant data relating to the equipment follow: $392,000 Purchase cost of the equipment Annual cost savings that will be provided by the equipment Life of the equipment $ 80,000 10 years Required: 1a. Compute the payback period for the equipment 1b. If the company requires a payback period of four years or less,...
2. A Company is considering replacing one of existing machine
with either a state of the art “Automatic Machine” which will
reduce the labor cost by 80% or with a standard machine. The
automatic machine will cost ₹ 3,50,000 with an estimated life of 7
years, whereas the standard machine will cost ₹ 2,00,000 with an
estimated life of 10 year. Both machine have no residual value.
Assume tax rate to be 40%. The annual sales and costs are estimated...
Identification and explanation of the main cost management
problem using the cost management theory,
a. Identification of (5) external or internal causes
that originates the proposed main cost management problem,
b. What should be Bay Area Health Network’s mission in
the context of the proposed main cost management problem and
internal and external causes?
c. Propose an adequate ABC analysis for Bay Area Health
Network’s situation to answer the questions presented in the
case
d. Define (5) cost management strategies...
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