Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are a widget manufacturer. You create widgets that sell in large quantities to various Telecomm companies. You are currently at your maximum capacity (10,000

You are a widget manufacturer. You create widgets that sell in large quantities to various Telecomm companies. You are currently at your maximum capacity (10,000 units a month). Your widgets sell for $25 and cost you $21.25 to make. In the future, you expect your sales to continue increasing by at least 3% a year. You have the opportunity to purchase some new equipment to increase production rates to 25,000 units a month and reduce the unit cost by $0.50 per unit. You must finance the purchase at an ANNUAL interest rate of 8%, payments made quarterly.

a. Assume you can immediately sell all widgets you make. If the machine will cost $1,000,000, how quickly can you payback to loan?
b. What should the loan payments be for part a?
c. If the machine will cost $1,500,000, with equal payments of $25,000, how many additional widgets (over 10,000) must you sell each month in order to break even?
d. How long will it take to repay the loan for part c?

Step by Step Solution

3.40 Rating (159 Votes )

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Decision Modeling With Spreadsheets

Authors: Nagraj Balakrishnan, Barry Render, Jr. Ralph M. Stair

3rd Edition

136115837, 978-0136115830

More Books

Students also viewed these Economics questions

Question

Box

Answered: 1 week ago