Questions 1 & 2 ask for cash flows only, no present values. They are a critical part of the problem, but since the problem is primarily about capital budgeting, they are not worth any points, and you have unlimited tries. Questions 3 & 4 require that you use the correct cash flows from 1 and 2 to determine the net present values of the two alternatives. You should use the present value tables in the Coursepack. The Brisbane Manufacturing Company produces a single model of a CD player. Each player is sold for $186 with a resulting contribution margin of $71. Brisbane's management is considering a change in its quality control system. Currently, Brisbane spends $38,000 a year to inspect the CD players. An average of 1,900 units turn out to be defective - 1,330 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. The proposed quality control system involves the purchase of an x-ray machine for $220,000. The machine would last for four years and would have salvage value at that time of $21,000. Brisbane would also spend $440,000 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 400 per year. 345 of these defective units would be detected and repaired at a cost of $44 per unit. Customers who still received defective players would be given a refund equal to 120% of the purchase price. Questions 1 & 2 (0 points; unlimited tries] 1. What is the Year 3 cash flow if Brisbane keeps using its current system? Submit Answer Tries 0/99 2. What is the Year 3 cash flow if Brisbane replaces its current system? Submit Answer Tries 0/99 Questions 3 & 4 [5 points each; 5 tries each] [NOTE: When computing present values, use the present value factors from the tables on page 118 in the Coursepack] 3. Assuming a discount rate of 8%, what is the net present value if Brisbane keeps using its current system? 404627.04 Submit Answer Incorrect. Tries 3/5 Previous Tries 4. Assuming a discount rate of 8%, what is the net present value if Brisbane replaces its current system? Submit Answer Tries 0/5 Table 1: Present Value of $1.00 Period 1% - 2% | 099; (098) | (9) 096 | 097 094 2 | 094 21 | 0933 | | 091 4 | 10 000 ) 11 1 0.896 0 804 | 12 | | 0 0 8 13 0.8 79 () | 14 1 0.870 1 0.75% 3% 1 4% 49 69 70 1 80 90% 10% 10% 12% 18% 14% 09 0962 1943 194 935 096 (0,911 | 1909 0.9) 0 8 0 885 0.877 10.870 094 092 093 069) 0073 0.57 0842 0 26 +1.8|2| 0 7 0 1 (0, 769 0.756 95090 864 0840 | 0 86 074 0 75110 1112 0.69060688 : ) 1 1 01 ,060 00066 060 1060) 4405350 160432 | Two 0 0 0.623 0 43 04 0513 0.4 0 450 025 0.000 0376 | 06 06 052 0$40 0 0 0 46 0 0 0 0 6 0 1803|| 6 0 ) 0.645 059 060 000 0, 460 0.4 0 49 0 0 0 0 08 024 1 066 06 0 450 505 .460,0 1860 160,0 030024 02 0.650 055 027 0.475 0.429 0385 | 010 01028 | 0 261 02370215 0, 701 | | 065 05 1,49 | | 0.440.397 01560319 10 286 02 0231028 0 17 ).64 0.00 0 0,46 0.415 0 4680 126 | 0 ) 02 0} 0 0 0 12 0 163 0.661 0.577 0, 505 0,442 0.388 0.340 01 299 | 0 263 | 0 242 | 0 205 | 0, 181, 0, 160 | 0, 14) 0 Table 2: Present Value of an Annuity of $1.00 1% - 2% 3% 4% 8% 6% 7% 8% 9% 10% 11% 12% | 13% 14% 15% | (099) 098 09 1962 - 052 093 0935 1926 1 (0,910,) 0.9) | ), 89 | (0).85 | 0 877 2 11.970 1.942 1913 1.886 1.859 1.833 1.808 1.783 1.759 1,736 1,713 1.690 1.668 1.647 [1.626 | 288222222267312.62250 241 242 244 2402 21212223| 1920 10 0 146 1465331 332 30) 37001197-914 55 | 4 5 13 4 55) 452 429 212 4 10) 39938 890 391 696 -60- 535733333S2| 5.4/ 3 24 2 5 076 49174767 4.62) 4 486 4 15 2 1 998 388938| 1 6 2 6 4 6 20 6 025786 5582 389 3 206 3033 86% 24 % 6 2 285 T60| 1.65214251020) | 63 6, 46 3 6 210 597. 54 5 545 5 445 146 4 964 99 4.6 39 445 8,5466 1621786 435 ,108 6, 802 6, 815 6 27 595 59559 32 512 46 . | 10 | 9.47 8.983 8 500 8III . 2 1 360 7.0246.710 1 6,418 | 6, 145 5 889 5.650 526526 .019 | 10, 368 9.78/ 9254 8.700 1 8 4267.887 .499 39 6. 605 | 6, 495 | 6 207 59 5.687 54535234 1211255 10 5 995 9, 45 % 863 8 384 1943 1536 461 | 6 846 , 492 6, 1 5,915.660) 5421 | 13 12 13 14 15 10,635 9 96 9, 494 8, 853 8, 358 1904 1,481 ,14) | 6, 5) | 6, 2 6, 123.842 5,333 14 13.004 12, 106 [ 1.296 | 10,563 9.899 1 9,295 8.745 | 8,244 1.786 [1,367 | 6,982 6.628 | 6. 302 [ 6.002 15.724