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The Brisbane Manufacturing Company produces a single rodel of a CD player. Each player is sold for $190 with resulting contribution margin of $71 Brisbane's

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The Brisbane Manufacturing Company produces a single rodel of a CD player. Each player is sold for $190 with resulting contribution margin of $71 Brisbane's management is considering a change in its quality control system. Currently, Brisbane spends $40,500 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 $80. 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 $210,000. The machine would last for five years and would have salvage value at that time of $19,000. Brisbane would also spend $590,000 immediately to train workers to better detect and repair defective units. Annual inspection costs would increase by S22,000. This new cantrol system vould reduce the number of defective units to 360 per year. 3DD of these defective units would be detected and repaired atcost of $45 per unit. Customers who still received defective players would be given a refund equal to 150% of the purchase price. Questions 1& 2 [0 points; unlimited tries] 1. What is the Year 2 cash flow if Brisbane keeps using its current system? 70733500 . Tries 1/99 2. What is the Year 2 cash flow if Brisbane replaces its current system? 70,908,900 HR. Tries 1/99 Questions 3 & 4 [S 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 6%, what is the net present value if Brisbane keeps using its current system? Tries 0/5 4. Assuming a discount rate of 6%, what is the net present value if Brisbane replaces its current system? Tries 0/5

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