Question 4 PartA A manufacturing company has the choice of two suppliers to buy a piece of equipment from to use in its process. Characteristics of these two suppliers and associated costs are tabulated below. The equipment from supplierA costs more to buy and maintain, but it also has more revenue per unit sold. Selling enough units will at some point make it worth the higher cost. How many units per year must the company sell in order to justify using supplierA (i.e. what is the breakeven number of units to sell)? Use an interest rate of 12% per year. SupplierA Supplier B Initial cost $4,000 $3,000 Sale price (revenue per unit) $4 $3 Transportation costs (per unit) $0 $1.25 Annual maintenance cost $1,400 $1,100 Salvage value $800 $700 Useful life of the equipment (years) 5 4 Question 4 Part A: Choose the correct Before Tax Cash Flow Diagram for this scenario from the following choices. Question 5 Part C A large company is planning to purchase equipment costing $250,000 and will depreciate it fully using straightline depreciation over 5 years. The company expects that the investment will have an annual benet of $64,000. Each use of the equipment will also provide a benet of $30. In 5 years, there will be no salvage value for the equipment. The company's combined marginal tax rate is 30%. Based on 18% after-tax MARR, how many uses of the equipment must the company have each year in order to justify its investment? Question 5 Part C: For years 1 5, what is the straight-line depreciation (SL Dn) value to be used? 0 6X 0 250000 0 12800 0 50000 Question 4 Part B A manufacturing company has the choice of two suppliers to buy a piece of equipment from to use in its process. Characteristics of these two suppliers and associated costs are tabulated below. The equipment from supplierA costs more to buy and maintain, but it also has more revenue per unit sold. Selling enough units will at some point make it worth the higher cost. How many units per year must the company sell in order to justify using supplier A (i.e. what is the breakeven number of units to sell)? Use an interest rate of 12% per year. Supplier A Supplier B Initial cost $4,000 $3,000 Sale price (revenue per unit) $4 $3 Transportation costs (per unit) $0 $1.25 Annual maintenance cost $1,400 $1,100 Salvage value $800 $700 Useful life of the equipment (years) 5 4 Question 4 Part B: Identify the correct Function Notation of AW for s_upplier A. (0 -4,000 (A/P, 12%, 5) - 1,400 (A/P, 12%, 5)+ 800 (A/F, 12%, 5) + 4.00N O -4,000 (A/ P, 12%, 20) - 1,400 + 800 (A/ F, 12%, 20) + 4.00N 0 -4,000 (A/P, 12%, 5) - 1,400 + 800 (A/F, 12%, 5) - 4.00N 0 -4,000 (A/P, 12%, 5) - 1,400 + 800 (A/F, 12%, 5) + 4.00N Question 4 Part D A manufacturing company has the choice of two suppliers to buy a piece of equipment from to use in its process. Characteristics of these two suppliers and associated costs are tabulated below. The equipment from supplierA costs more to buy and maintain, but it also has more revenue per unit sold. Selling enough units will at some point make it worth the higher cost. How many units per year must the company sell in order to justify using supplierA (i.e. what is the breakeven number of units to sell)? Use an interest rate of 12% per year. Supplier A Supplier B Initial cost $4,000 $3,000 Sale price (revenue per unit) $4 $3 Transportation costs (per unit) $0 $1.25 Annual maintenance cost $1,400 $1,100 Salvage value $800 $700 Useful life of the equipment (years) 5 4 Question 4 Part D: From the equations identied in Parts b and c, select the correct equation of the number of units the company should sell each year to breakeven O 4N - 2383.71 = 1.75N - 1941.24 0 4N- 2383.71=2.75-1941.24 O N=2383.71-1941.24 O 4N-2383.71= 1.75+ 1941.24 Question 4 Part E A manufacturing company has the choice of two suppliers to buy a piece of equipment from to use in its process. Characteristics of these two suppliers and associated costs are tabulated below. The equipment from supplierA costs more to buy and maintain, but it also has more revenue per unit sold. Selling enough units will at some point make it worth the higher cost. How many units per year must the company sell in order to justify using supplierA (i.e. what is the breakeven number of units to sell)? Use an interest rate of 12% per year. Supplier A Supplier B Initial cost $4,000 $3,000 Sale price (revenue per unit) $4 $3 Transportation costs (per unit) $0 $1.25 Annual maintenance cost $1,400 $1,100 Salvage value $800 $700 Useful life of the equipment (years) 5 4 Question 4 Part E: How many units per year must the company sell in order to justify using supplier A? Enter your answer in the form: 12345.67 Question 4 Part F A manufacturing company has the choice of two suppliers to buy a piece of equipment from to use in its process. Characteristics of these two suppliers and associated costs are tabulated below. The equipment from supplierA costs more to buy and maintain, but it also has more revenue per unit sold. Selling enough units will at some point make it worth the higher cost. How many units per year must the company sell in order to justify using supplierA (i.e. what is the breakeven number of units to sell)? Use an interest rate of 12% per year. Supplier A Supplier B Initial cost $4,000 $3,000 Sale price (revenue per unit) $4 $3 Transportation costs (per unit) $0 $1.25 Annual maintenance cost $1,400 $1,100 Salvage value $800 $700 Useful life of the equipment (years) 5 4 Question 4 Part F: Provide a statement to your answer to Part E. O C: The company needs the maximum amount found in part "E" per year to break-even O B: The company needs the minimum amount found in part "E" per year to breakeven O A: The company needs the exact amount found in part "E" per year to break-even O BothA&B