Nautical Creations is one of the largest producers of miniature ships in a bottle. An especially complex part of one of the ships needs special production equipment that is not useful for other products. The company purchased this equipment early in 2013 for $200.000. It's now January 1, 2020, and the manager of the Model Ships Division, Jert Finley, is considering two alternatives Alternative 1 - Produce the complex art using the current equipment The following relast year's average per unit manufacturing costs, when production was 7.400 S $3,05 Direct materials Direct labor Variable overhead Fed overhead 3.60 1.65 The equipment will last for five more years with zero disposal value at that time. It can be sold immediately for $40,000 Alternative Product the complex part with new. more efficient.com.ent. The cost of the new equipment is $230,000 and will have a five year useful life with an estimated disposal value at that time of $35,000. The sales representative selling the new eguiment stated. The new equipment will allow direct labor and variable overhead to be reduced by a total of $2.00 per unit. Finley think this estimates accurate, but also knows that a higher quality of direct material will be necessary with the new equipment, costing $0.15 more per unit. In addition, faxed overhead costs will increase by $2,000 Finley expects production to continue at 7.400 ships in each of the next five years REQUIRED (USE THE PRESENT VALUE TABLES ON PAGE 113 TO COMPUTE NET PRESENT VALUES. BE SURE TO USE THE NEGATIVE SIGN WHEN SUBMITTING NEGATIVE NET PRESENT VALUES, DO NOT INCLUDE A DOLLAR SIONI 1. Assuming a discount rate of 74, what is the net present value if Nautical Creations uses their current equipment to produce the part? 2. Assuming a discount rate of what is the net present value if Nautical Creations buys the new equipment to produce the part? Submit Answer Tries 0/5 Nautical Creations is one of the largest producers of miniature ships in a bottle. An especially complex part of one of the ships needs special production equipment that is not useful for other products. The company purchased this equipment early in 2013 for $200.000. It's now January 1, 2020, and the manager of the Model Ships Division, Jert Finley, is considering two alternatives Alternative 1 - Produce the complex art using the current equipment The following relast year's average per unit manufacturing costs, when production was 7.400 S $3,05 Direct materials Direct labor Variable overhead Fed overhead 3.60 1.65 The equipment will last for five more years with zero disposal value at that time. It can be sold immediately for $40,000 Alternative Product the complex part with new. more efficient.com.ent. The cost of the new equipment is $230,000 and will have a five year useful life with an estimated disposal value at that time of $35,000. The sales representative selling the new eguiment stated. The new equipment will allow direct labor and variable overhead to be reduced by a total of $2.00 per unit. Finley think this estimates accurate, but also knows that a higher quality of direct material will be necessary with the new equipment, costing $0.15 more per unit. In addition, faxed overhead costs will increase by $2,000 Finley expects production to continue at 7.400 ships in each of the next five years REQUIRED (USE THE PRESENT VALUE TABLES ON PAGE 113 TO COMPUTE NET PRESENT VALUES. BE SURE TO USE THE NEGATIVE SIGN WHEN SUBMITTING NEGATIVE NET PRESENT VALUES, DO NOT INCLUDE A DOLLAR SIONI 1. Assuming a discount rate of 74, what is the net present value if Nautical Creations uses their current equipment to produce the part? 2. Assuming a discount rate of what is the net present value if Nautical Creations buys the new equipment to produce the part? Submit Answer Tries 0/5
