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Ken Allen, capital budgeting analyst for Bally Gears Inc., has been asked to evaluate a proposal. The manager of the automotive division believes that replacing the robotics used on the heavy truck gear-line will produce total benefits of 560,000 (in today’s dollars) over the next 5 years. The existing robotics would produce benefits of $400,000 (also in today’s dollars) over that same period. An initial cash investment of $220,000 would be required to install the new equipment. The manager estimates that the robotics can be sold for $70,000. Show how Ken would apply marginal cost-benefit analysis techniques to the determine the following:
The marginal (ADDED) benefits of the new proposed robotics.
The marginal (ADDED) cost of the new proposed robotics.
The net benefit of the new proposed robotics.
What should Ken recommend the company do? Why?
What factors besides the costs and benefits should be considered before the final decision is made?
Chuck Brown will receive from his investment cash flows of $3,155, $3,480, and $3,840 at the end of years 1, 2 and 3 respectively. If he can earn 7.5 percent on any investment that he makes, what is the future value of his investment cash flows at th..
Consider the following information: Rate of Return If State Occurs State of Probability of Economy State of Economy Stock A Stock B Stock C Boom .17 .358 .458 .338 Good .43 .128 .108 .178 Poor .33 .018 .028 ?.062 Bust .07 ?.118 ?.258 ?.098 Requiremen..
The Diversified Growth Co. has three different divisions. Its low-risk division accounts for $5 million of its assets and has a beta of 0.8. Its middle-risk division accounts for $10 million of its assets and has a beta of 1.1, while its high-risk di..
Determine the beta of one security by regressing the returns for the share on the returns for the FT ALL Share Index and determine the co-variances for each pair of securities in the portfolio
(Yield to maturity) Citigroup has outstanding an issue of $1,000.00 face value, 8.45% coupon bonds which mature in 16 years. Calculate the bond's yield to maturity if its current market price is. 800, 1, 000, 1,150 1,300
Calculate the annual return for the 30-year maturity bond over the next five years.
part 1primary task response your first task is to post your own key assignment outline to the discussion area so that
A U.S. investor buys 100 shares of Heineken listed in Amsterdam for 40 Euros. She goes through a U.S. broker, and the current exchange rate is 1 euro = 1.1 U.S. dollars. Her total cost is $4,400, or $44 per share of Heineken (40 × 1.1 $ per €).
Image your small business that produces very small remote control aircraft capable of long sustained flights. You are ready to expand your business by competing for Department of Defense (DoD) contracts.
Grandview Clinic has fixed costs of $2 million and an average variable cost rate of $15 per visit. Its sole payer, an HMO, has proposed an annual capitation payment of $150 for each of its 20,000 members. Past experience indicates that the population..
Suppose you buy a round lot of Francesca Industries stock on 55 percent margin when the stock is selling at $20 a share. The broker charges a 10 percent annual interest rate, and commissions are 3 percent of the stock value on the purchase and sal..
The portion of the Federal Insurance Contributions Act (FICA) tax paid by employers is 7.65 percent and the portion paid by employees is 7.65 percent (for a total of 15.3 percent). Suppose that absent FICA taxes, workers receive a competitive equilib..
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