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A company is considering increasing the production capacity from 3,000 to 4,500 units per year. According to their calculations (which are all based on current
A company is considering increasing the production capacity from 3,000 to 4,500 units per year. According to their calculations (which are all based on current prices) this would give an additional annual profit, after allowing for production costs but excluding the maintenance and initial financing costs, of 191 per extra unit of ca- pacity per year. The initial costs associated with increase of capacity are as follows: Purchase price of 400 machines providing 1500 units of capacity 800,000 Installation of machines 185,000 Extension of factory building 429,200 Total 1,414,200 In addition, there is an annual cost of 327 of maintenance cost per machine, i.e. 130, 800 per annum. (i) Write down the yield equation of the business plan, assuming that there will be no inflation and that the net profit each year will be received at the end of the year. (ii) The solutions of the yield equation in (-1,00) are among the values: 0.09070527, 0.09370527, 0.09670527. Identify all solutions in (-1,) and comment on the existence of the yield, also known as the internal rate of return. A company is considering increasing the production capacity from 3,000 to 4,500 units per year. According to their calculations (which are all based on current prices) this would give an additional annual profit, after allowing for production costs but excluding the maintenance and initial financing costs, of 191 per extra unit of ca- pacity per year. The initial costs associated with increase of capacity are as follows: Purchase price of 400 machines providing 1500 units of capacity 800,000 Installation of machines 185,000 Extension of factory building 429,200 Total 1,414,200 In addition, there is an annual cost of 327 of maintenance cost per machine, i.e. 130, 800 per annum. (i) Write down the yield equation of the business plan, assuming that there will be no inflation and that the net profit each year will be received at the end of the year. (ii) The solutions of the yield equation in (-1,00) are among the values: 0.09070527, 0.09370527, 0.09670527. Identify all solutions in (-1,) and comment on the existence of the yield, also known as the internal rate of return
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