Chen Sun (student -section: 001) ACC230, Spring 2016-Survey of Accounting Concepts Messages Courses Help Logou Main Menu Contents Grades Course Contents pROBLEM #6 [CAPITAL BUDGETING] Timer Notes Notes e Evaluate- FeedbackPrint Olnfo Evaluate lad Fee TimerNote Timer This is a problem with mutually exclusive projects. You should evaluate each project separately. Questions 1 & 2 ask for cash flows only. They are not worth any points, and you are allowed unlimited tries. Their purpose is to make sure you've figured out the correct cash flows before you move on to net present values Questions 3 & They are worth five points each, and you are allowed five tries for each. You should use the 4 require that you use the correct cash flows from 1 and 2 to determine the net present values of the two alternatives present value tables in the Coursepack The Brisbane Manufacturing Company produces a single model of a CD player. Each player is sold for $193 with a resulting contribution margin of $79. management is considering a change in its quality control system. Currently, Brisbane spends $39,000 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 $85. If a defective CD player is not identified in the inspection process, the customer who receives it is given a full refund of the purchase price. Competitors are expected to improve their quality control systems in the future, so if Brisbane does not improve its system, sales volu year for the next five years. In other words, it will fall by 550 units in the first year, 1,100 units in the second year, etc y control systems in the future, so if Brisbane does not improve its system, sales volume is expected to fall by 550 CD players a e proposed quality control system involves the purchase of an x-ray machine for $310,000. The machine would last for five years and would have lvage value at that time of $20,000. Brisbane would also spend $800,000 immediately to train workers to better detect and repair defective units Annual inspection costs would increase by $24,000. This new control system would reduce the number of defective units to 380 defec to one-and-a-fourth times the purchase price per year, 315 of these tive units would be detected and repaired at a cost of $49 per unit. Customers who still received defective players would be given a refund equal Questions 1&2 00 points; unlimited tries] hat is the Year 2 cash flow if Brisbane keeps using its current syste? Submit Answer Tries 0/99 2. What is the Year 2 cash flow if Brisbane replaces its current system? Submit Answer Tries 0/99 Questions 3 & 4 [5 points each; 5 tries each] 3. Assuming a discount rate of 6%, what is the net present value if Brisbane keeps using its current system? | Submit Answer Tries 0/5 4. Assuming a discount rate of 6%, what is the net present value if Brisbane replaces its current system? Submit Answer Tries 0/5
