Reference no: EM131188071
Delaware Chemicals is considering the installation of a computer process control system in one of its processing plants. This plant is used for 3,000 operating hours per year, to produce a proprietary demulsification chemical. The annual production of the demulsification chemical amounts to 25,000 kilograms per year, and it sells for $10 per kilogram. The proposed computer process control system will cost $150,000 and is expected to provide specific benefits in the production of the demulsification chemical as follows:
- First, the selling price of the product could be increased by $2 per kilogram because the product would be of higher purity, which translates into better demulsification performance.
- Second, production volumes would increase by 5,000 kilograms per year as a result of higher reaction yields, without any increase in requirements for raw material quantities or production time.
- Finally, the number of process operators could be reduced by one per shift, which represents a savings of $10 per hour. The new control system would result in additional maintenance costs of $80,000 per year and has an expected useful life of eight years.
a) Identify the cash inflows, outflows and determine the net cash flows over the life of the project.
b) How long does it take to recover the investment?
c) If the firm's interest rate is 15%, what would be the discounted-payback period for this project?
d) Determine the net gain for the company from this project assuming an interest rate of 15%.
|
Explain how multiple expansion applies
: In recent years Sweep Programs have grown throughout the U.S. With this financial innovation, banks automatically sweep excess funds from their customers’ checkable deposits into interest bearing MMDAs, which are part of savings and time deposits. Br..
|
|
What is the current market price of the bonds
: Bright Sun, Inc. sold an issue of 30-year $1,000 par value bonds to the public. The bonds had a 10.97 percent coupon rate and paid interest annually. It is now 15 years later. The current market rate of interest on the Bright Sun bonds is 8.65 percen..
|
|
Labor rate and efficiency variances
: Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant has been experiencing problems as shown by its June contribution format income statement below: Budgeted Actual Sales (3,000 pools) $ 210,000 $ 210,000 Variable ..
|
|
What is the net present value of each bid
: AOL is considering two proposals to overhaul its network infrastructure. They have received two bids. The first bid from Huawei will require a $22 million upfront investment and will generate $20 million in savings for AOL each year for the next 33 y..
|
|
Considering installation of computer process control syatem
: Delaware Chemicals is considering the installation of a computer process control system in one of its processing plants. This plant is used for 3,000 operating hours per year, to produce a proprietary demulsification chemical. the selling price of t..
|
|
Planned at the start although the ultimate design calls
: A bi-level mall is under construction. Installation of only 10 escalators is planned at the start although the ultimate design calls for 16. The question arises whether to provide necessary facilities that would permit the installation of the additio..
|
|
Net present value of the more attractive alternative
: A prospective MBA student earns $45,000 per year in her current job and expects that amount to increase by 8% per year. She is considering leaving her job to attend business school for two years at a cost of $30,000 per year. What is the net present ..
|
|
What will be the companys budgeted profit
: During 2014, Ephraim Corporation reported revenues of $891,640 and profits of $91,486. Fixed costs were $332,043 and 44,582 units were sold. If costs and prices are expected to stay the same in 2015, and Ephraim expects to sell 45,000 units, what wil..
|