The Brisbane Manufacturing Company produces a single model of a CD player. Each player is sold for $198 with a resulting contribution margin of $72. Brisbane's management is considering a change in its quality control system. Currently, Brisbane spends $40,000 a year to inspect the CD players. An average of 2,000 units turn out to be defective - 1,400 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 $19,000. Brisbane would also spend $440,000 immediately to train workers to better detect and repair defective units. Annual inspection costs would increase by $23,000. This new control system would reduce the number of defective units to 370 per year. 310 of these defective units would be detected and repaired at a cost of $43 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? $-277,800 You are correct. Your receipt no. is 156-8104 Previous Tries 2. What is the Year 3 cash flow if Brisbane replaces its current system? $-90,586 You are correct. Previous Tries Your receipt no. is 156-9192 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? 920046 Submit Answer Tries 2/5 Previous Tries 4. Assuming a discount rate of 8%, what is the net present value if Brisbane replaces its current system? 946065 Submit Answer Incorrect. Tries 1/5 Previous Tries USDJSUSU 116 M 2: TEXT & SE PROBLEMS Table 1: Present Value of $1.00 4% Period 1% 2% 3% 10.990 0.980 0.071 0.9800.9610.043 0.951 0.906 0.9420.888 0.933 0.871 0.923 0.853 0.914 0.837 0.90 0.820 1 .96 0.804 O 887 0.788 0 6790 773 0.870 0.758 0.863 0.837 0.813 0.789 0.766 0.744 0.722 0.701 0.681 0,661 0.925 0.89 1.855 0.822 0.750 0.760 0.731 0,203 0.676 0.650 0.625 0.601 0.577 5% 951 0.907 0.864 0.823 0.784 0.746 0.711 0627 0645 0.614 0.55 0.557 0.530 0.505 20 1 % 12% 13% 14% 15%- 1030RE 0 000191 0.9 0. 1 0. 1 0.870 0.19 0.873 0.8570842 0826 0.812 0.797 0.78 0.769 0.756 0.840 0.816 0.704072 0.75 0.231 0.712 0.693 06750658 0.292 0.763 0.735 0.70 0.6830699 0.636 0.613 0.5920.572 07470.71306 0 .60 0.621 0 593 0.567 0.54 0.5190 .49 0.705 0.6 0.630 0.596 0.564 0.53505070.4800456 0432 0.665 0.623 0.53 05470513 0.42 0.452 0.425 0.400 0.376 0.622 5 82 540 0.502 0.46704340404 0.376 0.3510 327 0.592 0.3440500 0.400.4240 3 61 0.333 0. 0.284 0.558 0.58 0 463 0.422 0386 0.352 0.322 0.295 0.270 0.247 0.527 0.415 0.41290388 0.150 1 170 287 0 261 0.237 1215 0.497 0.444 0.797 0.156 0.319 0.2160.257 0.23 0.205 0.187 0.469 0415 0.368 0.326 0.290 0.25% 0.229 0.204 0.1820.163 04420 388 0340 0299 0263 0.232 0205 0.1810.1000.141 11 12 13 14 00900 Table 2: Present Value of an Annuity of $1.00 Period 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 1 0.9900980 0,971 0.9620.952 0.943 0.9350 926 091709090901 0.09 0.885 0.877 0.870 2 1 970 1962 1.913 1.836 1.859 1.833 1.808 1.73 1.759 1.736 1.713 1,6901.668 1647 1626 3 2.9412 R 2 .829 2.775 2.723 2673 2624 2.577 2.531 2.487 2.4442402 2.36 2.3922283 19 1 1712 3630 3.5463,4653387 3.312 3.240 3.1703.102 3.037 29429142.855 31 1 5 04452 4.3294212 4.100 3.9933.890 3.791 3.695 3.605 3.517 3.433 1352 6 5.7955 5 417 5.2425.076 4.917 4.767 4.623 4.4864 .355 4.23 4.11199983.8893.784 92861726.73060025,786 5.582 5.389 5.205 5.033 4.868 4.712 4564 4.4214 .288 4.100 76527 25 7020 6.7326,463 6210 3.971 5.7475.535 5.335 5.1464.96 4.799 4.694487 9 85668.1627.7867.4357.108 6.8026,515 6.247 5.9955 .759 5.9375 ,328 5.1324 ,946 4 TT2 10 9471303 8.530 8.111 7.722 7.36070246 710 6.4186.145 5.889 5.650 3.426 5216019 10366 07879.2538.760 8,3067877.499 7.139 606 6,4956202 5.938 5.687551 52 12 11.25510 STS 90549.3858.863 384 7.0437.536 7.1616.814 6.4926.194 5918560 3.421 13 12.1341 348 10,635 99869.3948.853 8.3587.9047.487 7.103 6.750 6.424 6.1225.042 558 14 13.00412.10611296 10.5639.899 9.2958.7458244 7.786 7.3676.926628 63026005724 DDDDDDDDD The Brisbane Manufacturing Company produces a single model of a CD player. Each player is sold for $198 with a resulting contribution margin of $72. Brisbane's management is considering a change in its quality control system. Currently, Brisbane spends $40,000 a year to inspect the CD players. An average of 2,000 units turn out to be defective - 1,400 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 $19,000. Brisbane would also spend $440,000 immediately to train workers to better detect and repair defective units. Annual inspection costs would increase by $23,000. This new control system would reduce the number of defective units to 370 per year. 310 of these defective units would be detected and repaired at a cost of $43 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? $-277,800 You are correct. Your receipt no. is 156-8104 Previous Tries 2. What is the Year 3 cash flow if Brisbane replaces its current system? $-90,586 You are correct. Previous Tries Your receipt no. is 156-9192 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? 920046 Submit Answer Tries 2/5 Previous Tries 4. Assuming a discount rate of 8%, what is the net present value if Brisbane replaces its current system? 946065 Submit Answer Incorrect. Tries 1/5 Previous Tries USDJSUSU 116 M 2: TEXT & SE PROBLEMS Table 1: Present Value of $1.00 4% Period 1% 2% 3% 10.990 0.980 0.071 0.9800.9610.043 0.951 0.906 0.9420.888 0.933 0.871 0.923 0.853 0.914 0.837 0.90 0.820 1 .96 0.804 O 887 0.788 0 6790 773 0.870 0.758 0.863 0.837 0.813 0.789 0.766 0.744 0.722 0.701 0.681 0,661 0.925 0.89 1.855 0.822 0.750 0.760 0.731 0,203 0.676 0.650 0.625 0.601 0.577 5% 951 0.907 0.864 0.823 0.784 0.746 0.711 0627 0645 0.614 0.55 0.557 0.530 0.505 20 1 % 12% 13% 14% 15%- 1030RE 0 000191 0.9 0. 1 0. 1 0.870 0.19 0.873 0.8570842 0826 0.812 0.797 0.78 0.769 0.756 0.840 0.816 0.704072 0.75 0.231 0.712 0.693 06750658 0.292 0.763 0.735 0.70 0.6830699 0.636 0.613 0.5920.572 07470.71306 0 .60 0.621 0 593 0.567 0.54 0.5190 .49 0.705 0.6 0.630 0.596 0.564 0.53505070.4800456 0432 0.665 0.623 0.53 05470513 0.42 0.452 0.425 0.400 0.376 0.622 5 82 540 0.502 0.46704340404 0.376 0.3510 327 0.592 0.3440500 0.400.4240 3 61 0.333 0. 0.284 0.558 0.58 0 463 0.422 0386 0.352 0.322 0.295 0.270 0.247 0.527 0.415 0.41290388 0.150 1 170 287 0 261 0.237 1215 0.497 0.444 0.797 0.156 0.319 0.2160.257 0.23 0.205 0.187 0.469 0415 0.368 0.326 0.290 0.25% 0.229 0.204 0.1820.163 04420 388 0340 0299 0263 0.232 0205 0.1810.1000.141 11 12 13 14 00900 Table 2: Present Value of an Annuity of $1.00 Period 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 1 0.9900980 0,971 0.9620.952 0.943 0.9350 926 091709090901 0.09 0.885 0.877 0.870 2 1 970 1962 1.913 1.836 1.859 1.833 1.808 1.73 1.759 1.736 1.713 1,6901.668 1647 1626 3 2.9412 R 2 .829 2.775 2.723 2673 2624 2.577 2.531 2.487 2.4442402 2.36 2.3922283 19 1 1712 3630 3.5463,4653387 3.312 3.240 3.1703.102 3.037 29429142.855 31 1 5 04452 4.3294212 4.100 3.9933.890 3.791 3.695 3.605 3.517 3.433 1352 6 5.7955 5 417 5.2425.076 4.917 4.767 4.623 4.4864 .355 4.23 4.11199983.8893.784 92861726.73060025,786 5.582 5.389 5.205 5.033 4.868 4.712 4564 4.4214 .288 4.100 76527 25 7020 6.7326,463 6210 3.971 5.7475.535 5.335 5.1464.96 4.799 4.694487 9 85668.1627.7867.4357.108 6.8026,515 6.247 5.9955 .759 5.9375 ,328 5.1324 ,946 4 TT2 10 9471303 8.530 8.111 7.722 7.36070246 710 6.4186.145 5.889 5.650 3.426 5216019 10366 07879.2538.760 8,3067877.499 7.139 606 6,4956202 5.938 5.687551 52 12 11.25510 STS 90549.3858.863 384 7.0437.536 7.1616.814 6.4926.194 5918560 3.421 13 12.1341 348 10,635 99869.3948.853 8.3587.9047.487 7.103 6.750 6.424 6.1225.042 558 14 13.00412.10611296 10.5639.899 9.2958.7458244 7.786 7.3676.926628 63026005724 DDDDDDDDD