cash flow for current system
Total defective units-detected
=2100-1680
=420 will be refunded
year 2 cash flow
Annual inspection cost -repairing cost *units repaired- refunded units
= -$38,500 -($80*1680)-420*187
=-$38500-$134400-$78,540
= -$251,440 [use negative sign]
new system cash flow in year 2
annual inspection cost -repairing cost*units repaired - refunded units
= -[$38,500+$21,000increase]-345*$46-[400-345]*187*120%
= -59500-15870-12342
= -$87,712 [use negative sign]
NPV is difference between present value of cash inflow and cash outflow
positive net present value means that the project is better
CURRENT SYSTEM
YEAR | cash flow | pv factor at 6% | present value | |
1-5 | -$251,440 | 4.212[1/1.06]1+[1/1.06]2+[1/1.06]3+[1/1.06]4+ [1/1.06]5 | -$1,059,065 | [$251,440*4.212] |
NPV = -$1,059,065 |
new system
YEAR | cash flow | pv factor at 6% | present value |
1-5 | $-87,712 | 4.212 | -$369,443 |
0 | $-180,000 | 1 | -$180,000 |
0 | -470,000 | 1 | -$470,000 |
5 | $18,000 | 0.747 | $13,446 |
NET PRESENT VALUE | -$1,005,997 |
The Brisbane Manufacturing Company produces a single model of a CD player. Each player is sold for $187 with a resu...
The Brisbane Manufacturing Company produces a single model of a CD player. Each player is sold for $187 with a resulting contribution margin of $78. Brisbane's management is considering a change in its quality control system. Currently, Brisbane spends $38,500 a year to inspect the CD players. An average of 2,100 units turn out to be defective 1,680 of them are detected in the inspection process and are repaired for $80. If a defective CD player is not identified in...
The Brisbane Manufacturing Company produces a single model of a CD player. Each player is sold for $208 with a resulting contribution margin of $77. Brisbane's management is considering a change in its quality control system. Currently, Brisbane spends $41,500 a year to inspect the CD players. An average of 1,800 units turn out to be defective - 1,260 of them are detected in the inspection process and are repaired for $85. If a defective CD player is not identified...
The Brisbane Manufacturing Company produces a single model of a CD player. Each player is sold for $199 with a resulting contribution margin of $79. Brisbane's management is considering a change in its quality control system. Currently, Brisbane spends $40,500 a year to inspect the CD players. An average of 2,100 units turn out to be defective - 1,470 of them are detected in the inspection process and are repaired for $85. If a defective CD player is not identified...
The Brisbane Manufacturing Company produces a single model of a CD player. Each player is sold for $204 with a resulting contribution margin of $80. Brisbane's management is considering a change in its quality control system. Currently, Brisbane spends $38,500 a year to inspect the CD players. An average of 1,900 units turn out to be defective - 1,330 of them are detected in the inspection process and are repaired for $85. If a defective CD player is not identified...
The Brisbane Manufacturing Company produces a single model of a CD player. Each player is sold for $190 with a resulting contribution margin of $70. Brisbane's management is considering a change in its quality control system. Currently, Brisbane spends $41,500 a year to inspect the CD players. An average of 1,900 units turn out to be defective - 1,330 of them are detected in the inspection process and are repaired for $85. If a defective CD player is not identified...
The Brisbane Manufacturing Company produces a single model of a CD player. Each player is sold for $204 with a resulting contribution margin of $70. Brisbane's management is considering a change in its quality control system. Currently, Brisbane spends $42,000 a year to inspect the CD players. An average of 2,200 units turn out to be defective - 1,760 of them are detected in the inspection process and are repaired for $80. If a defective CD player is not identified...
The Brisbane Manufacturing Company produces a single model of a CD player. Each player is sold for $195 with a resulting contribution margin of $76. Brisbane's management is considering a change in its quality control system. Currently, Brisbane spends $42,000 a year to inspect the CD players. An average of 2,200 units turn out to be defective - 1,760 of them are detected in the inspection process and are repaired for $75. If a defective CD player is not identified...
The Brisbane Manufacturing Company produces a single model of a CD player. Each player is sold for $187 with a resulting contribution margin of $80. Brisbane's management is considering a change in its quality control system. Currently, Brisbane spends $42,000 a year to inspect the CD players. An average of 2,100 units turn out to be defective - 1,680 of them are detected in the inspection process and are repaired for $75. If a defective CD player is not identified...
The Brisbane Manufacturing Company produces a single model of a CD player. Each player is sold for $204 with a resulting contribution margin of $70. Brisbane's management is considering a change in its quality control system. Currently, Brisbane spends $42,000 a year to inspect the CD players. An average of 2,200 units turn out to be defective - 1,760 of them are detected in the inspection process and are repaired for $80. If a defective CD player is not identified...
The Brisbane Manufacturing Company produces a single model of a CD player. Each player is sold for $182 with a resulting contribution margin of $70. Brisbane's management is considering a change in its quality control system. Currently, Brisbane spends $41,000 a year to inspect the CD players. An average of 2,100 units turn out to be defective - 1,680 of them are detected in the inspection process and are repaired for $75. If a defective CD player is not identified...