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Answer to the 2 colored boxes? 9) Analyzing Financial Alternatives A few manufacturers make industrial drum-making equipment. Most of the manufacturing equipment is fairly identical
Answer to the 2 colored boxes?
9) Analyzing Financial Alternatives A few manufacturers make industrial drum-making equipment. Most of the manufacturing equipment is fairly identical and regardless of brand, each requires approximately the same amount of electricity. However, there can be significant differences in financing terms, delivery cost, and warranties, The drum-making equipment will allow ADC to build their own drum shells and not be dependent on the quality of shells offered by shell manufacturers. In addition, ADC can more carefully choose the type of wood to use in shell manufacture. However, due to a lack of economies of scale, ADC will not be able to save a lot of money by manufacturing drum shells themselves, but ADC may possibly sell drums at a higher retail price by constructing shells from higher quality wood. Listed below is ADC's desired discount rate (rate of return on investments) and information in regard to the potential drum-making equipment vendors. ADC's discount rate interest rate) for evaluating capital expenditures: 18% Vendor - Thunder Drums: Thunder Drums offers a financing plan. Annual increase in sales revenue (cash-in) due to manufacturing higher quality drums Down Payment (due immediately) Annual payments to be paid at the end of each year for 4 years. Annual shell savings by manufacturing rather than purchasing shells Salvage value at end of equipment's life Equipment's life expectancy (years) $ $ 75,000 180,000 90,000 35,000 10,000 $ Vendor - Drum Solutions: Drum Solutions produces high-quality equipment. Cash price Annual increase in sales revenue due to manufacturing higher quality drums Annual shell savings by manufacturing rather than purchasing shells Salvage value at end of equipment's life Equipment's life expectancy (years) $ $ $ $ 460,000 70,000 40,000 5,000 9a Calculate the following for each vendor 1) Cash Payback 2) Net Present Value 3) Profitability Index 4) Intemal Rate of Return (10) Discuss and explain each of the "Four Costs of Quality." Provide examples. Are all four costs of quality equal in cost and priorityStep by Step Solution
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