Question
1. Kauai Tools Inc. is planning to invest in new manufacturing equipment to make a new garden tool. The new garden tool is expected to
1. Kauai Tools Inc. is planning to invest in new manufacturing equipment to make a new garden tool. The new garden tool is expected to generate additional annual sales of 7,500 units at $54 each. The new manufacturing equipment will cost $170,600 and is expected to have a 10-year life and a $13,100 residual value. Selling expenses related to the new product are expected to be 5% of sales revenue. The cost to manufacture the product includes the following on a per-unit basis:
2.
Stay-In-Style (SIS) Hotels Inc. is considering the construction of a new hotel for $90 million. The expected life of the hotel is 10 years with no residual value. The hotel is expected to earn revenues of $26 million per year. Total expenses, including depreciation, are expected to be $15 million per year. Stay-In-Style Hotels management has set a minimum acceptable rate of return of 14%.
3.
The plant manager of Orlando Electronics Company is considering the purchase of new automated assembly equipment. The new equipment will cost $208,000. The manager believes that the new investment will result in direct labor savings of $52,000 per year for 10 years.
Thank You!
Determine the net cash flows for the first year of the project, Years 29, and for the last year of the project. Use the minus sign to indicate cash outflows. Do not round your intermediate calculations but, if required, round your final answers to the nearest dollar. a. Determine the equal annual net cash flows from operating the hotel. Enter your answer in million. Round your answer to two decimal places. $ million Present Value of an Annuity of $1 at Combound Interest b. Compute the net present value of the new hotel, using the present value of an annuity of $1 table above. Round to the nearest million dollars. If required, use the minus sign to indicate a negative net present value. Net present value of hotel project: $ million c. Does your analysis support construction of the new hotel? , because the net present value is Present Value of an Annuity of $1 at a. What is the payback period on this project? years b. What is the net present value, assuming a 10% rate of return? Use the table provided above. Round to the nearest whole dollar. Net present value $ c. What else should the manager consider in the analysisStep by Step Solution
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