How long would it take to pay back the investment required

Assignment Help Econometrics

Reference no: EM13222632

A domestic producer of baby carriages, Pramble, buys the wheels from a company in the north of England. Currently the wheels cost $4 each, but for a number of reasons the price will double. In order to produce the wheels themselves, Pramble would have to add to existing facilities at a cost of $800,000. It estimates that its unit cost of production would be $3.50. At the current time, the company sells 10,000 carriages annually. (Assume that there are four wheels per carriage.)

a. At the current sales rate, how long would it take to pay back the investment required for the expansion?

b. If sales are expected to increase at a rate of 15 percent per year, how long will it take to pay back the expansion?

Reference no: EM13222632

Questions Cloud

Develop a graphic rating scale for a university teacher : develop a graphic rating scale for a university teacher (10 items)

Describe how to prepare the solution : Discuss how to prepare the soltion starting from 0.100 M formic acid and 0.150 M sodium formate

How would the order quantity change : How would the order quantity change if the loss for each unsold parka would not be 8%, but 46% in the above scenario and which assumptions of the newsboy model correspond to the real situation described in the case; which do deviate strongly?

Should nike be held responsible for working conditions : What would you do if you were in a position at Nike to decide whether to continue or revise your labor practices in a foreign country?

How long would it take to pay back the investment required : In order to produce the wheels themselves, Pramble would have to add to existing facilities at a cost of $800,000. It estimates that its unit cost of production would be $3.50. At the current time, the company sells 10,000 carriages annually.

Differences between modular and virtual organizations : What are the differences between modular and virtual organizations? What are their advantages and disadvantages?

Explain how many grams of water at 0 degrees c : How many grams of water at 0 degrees C could be frozen to ice at 0 degrees C by the evaporation of 58.82 mol NH3?

How do formal workplaces differ from informal workplaces : How do formal workplaces differ from informal workplaces?

How do companies use reengineering to redesign : How do companies use reengineering to redesign organizational processes?

User Account

All Pages