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Whats the NPV by using bakersdream? Bread Maker Opportunity EEC has obtained information on the Bakers Dream, a high-end commercial-grade bread maker. The BakersDream would
Whats the NPV by using bakersdream?
Bread Maker Opportunity EEC has obtained information on the Bakers Dream, a high-end commercial-grade bread maker. The BakersDream would replace the current equipment at EEC, requiring no additional counter space, and using less electricity. It would increase capacity by 500 hours. For the purpose of your analysis, assume these hours would be used to produce the sandwich option that was NOT PICKED in your previous analysis. The BakersDream costs $200,000. Installation and training are an additional $10,000. EEC can sell its old equipment for $4,000. Annual costs are expected to be as follows: Maintenance (1) $2,500 Depreciation (2) 8,200 Electrical (3) 4,000 Note 1: The BakersDream requires annual maintenance to be performed by the manufacturer or the warranty is void. Note 2: The Bakers Dream will be depreciated on a straight-line basis over 25 years, with no salvage value. Note 3: Electricity costs for the BakersDream are expected to be $4,000 per year. Electricity for the old equipment was $2,500 per year. EEC's rate of return is 6% for evaluation of projects. EEC's corporate tax rate is 25%. The present value of the tax shield for the Bakers Dream is $28,000. Bread Maker Opportunity EEC has obtained information on the Bakers Dream, a high-end commercial-grade bread maker. The BakersDream would replace the current equipment at EEC, requiring no additional counter space, and using less electricity. It would increase capacity by 500 hours. For the purpose of your analysis, assume these hours would be used to produce the sandwich option that was NOT PICKED in your previous analysis. The BakersDream costs $200,000. Installation and training are an additional $10,000. EEC can sell its old equipment for $4,000. Annual costs are expected to be as follows: Maintenance (1) $2,500 Depreciation (2) 8,200 Electrical (3) 4,000 Note 1: The BakersDream requires annual maintenance to be performed by the manufacturer or the warranty is void. Note 2: The Bakers Dream will be depreciated on a straight-line basis over 25 years, with no salvage value. Note 3: Electricity costs for the BakersDream are expected to be $4,000 per year. Electricity for the old equipment was $2,500 per year. EEC's rate of return is 6% for evaluation of projects. EEC's corporate tax rate is 25%. The present value of the tax shield for the Bakers Dream is $28,000Step by Step Solution
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