1. You (many years ago) are deciding whether to upgrade your company's equipment from typewriters to computer technology at a cost of $2,500 per machine, and machines will be replaced one-to-one. The typewriter technology was able to output $8,000 per unit per year, and you expect the computers to be able to output $9829 per unit per year (forever), but render the typewriters completely worthless. What would the NPV be of making this upgrade, per upgraded unit? Assume a 12.6% interest rate.
2. Your production of widgets is governed by an average production cost equation, avg. cost = $1 + $5,000/(x+1000) where x is the number of goods produced. If you are currently selling 5,000 units at a price $3.08 per widget, what is the marginal cost of selling an additional unit?
1.
=-2500+(9829-8000)/12.6%=12015.87
2.
Total cost=x+5000*x/(x+1000)
Marginal cost=1+5000*(0+1000*(x+1000)^(-2))=1+5000*1000/(x+1000)^2=5.97
1. You (many years ago) are deciding whether to upgrade your company's equipment from typewriters to...
You (many years ago) are deciding whether to upgrade your company's equipment from typewriters to computer technology at a cost of $2,500 per machine, and machines will be replaced one-to-one. The typewriter technology was able to output $8,000 per unit per year, and you expect the computers to be able to output $9526 per unit per year (forever), but render the typewriters completely worthless. What would the NPV be of making this upgrade, per upgraded unit? Assume a 12.3% interest...
You manage a software company that requires internet bandwidth to produce output. Currently your company is using 87% of its capacity, but is considering an expansion to utilize the additional bandwidth. Doing so will require $13,000 in additional expenditures per year forever, and generate $36 additional profits each year forever. The expansion will require a one time cost of $100,000. What is the NPV of undertaking this expansion project? Assume a cost of capital of 14.5%. ________________________ Your production of...
Assignment 1: Memo to Management You are working in the finance department of Space Sky Flight Ltd (SSF). The Company has spent $6.5 million in research and development over the past 12 months developing a drone capable to fix satellites to compete in the space industry. SSF’s directors now need to choose between three options for bringing this product to the market. These options are: Option A: Manufacturing the product “in-house” and selling directly to the market Your task Your...
Case Study 1: Should a Computer Grade Your Essays? Would you like your college essays graded by a computer? Well, you just might find that happening in your next course. In April 2013, EdX, a Harvard/MIT joint venture to develop massively open online courses (MOOCs), launched an essay-scoring program. Using arti ficial intelligence technology, essays and short answers are immediately scored and feedback tendered, allowing students to revise, resubmit, and improve their grade as many times as necessary. The non-profit...