Question
Wisconsin Snowmobile Corp. is considering a switch to level production. Cost efficiencies would occur under level production, and aftertax costs would decline by $45,600, but
Wisconsin Snowmobile Corp. is considering a switch to level production. Cost efficiencies would occur under level production, and aftertax costs would decline by $45,600, but inventory would increase by $380,000. Wisconsin Snowmobile would have to finance the extra inventory at a cost of 13.0 percent. |
a-1. | Determine the extra cost or savings of switching over to level production. (Input the amount as a positive value.) |
(Click to select)ProfitLoss | $ |
a-2. | Should the company go ahead and switch to level production? | ||||
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b. | How low would interest rates need to fall before level production would be feasible? (Input your answer as a percent rounded to the nearest whole number.) |
Interest rate | % |
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