Net present value if brisbane keeps using its current system

Assignment Help Financial Management

Reference no: EM131892762

The Brisbane Manufacturing Company produces a single model of a CD player. Each player is sold for $189 with a resulting contribution margin of $70.

Brisbane's management is considering a change in its quality control system. Currently, Brisbane spends $41,000 a year to inspect the CD players. An average of 2,100 units turn out to be defective - 1,470 of them are detected in the inspection process and are repaired for $75. If a defective CD player is not identified in the inspection process, the customer who receives it is given a full refund of the purchase price.

The proposed quality control system involves the purchase of an x-ray machine for $180,000. The machine would last for five years and would have salvage value at that time of $21,000. Brisbane would also spend $580,000 immediately to train workers to better detect and repair defective units. Annual inspection costs would increase by $20,000. This new control system would reduce the number of defective units to 380 per year. 320 of these defective units would be detected and repaired at a cost of $46 per unit. Customers who still received defective players would be given a refund equal to one-and-a-fourth times the purchase price.

1. What is the Year 3 cash flow if Brisbane keeps using its current system?

2. What is the Year 3 cash flow if Brisbane replaces its current system?

3. Assuming a discount rate of 8%, what is the net present value if Brisbane keeps using its current system?

4. Assuming a discount rate of 8%, what is the net present value if Brisbane replaces its current system?

Reference no: EM131892762

Questions Cloud

Rolexwatches offered lower-priced products : If upscale manufacturers of prestige products like BMW autos, Tiffany glass, or Rolexwatches offered lower-priced products, what might happen

How will you implement the idea of change : We tend to think that change is "not a good thing." Although change is often the beginning of new opportunities. Without change everything stays the same.

Which clause in this sentence is used as an adjective : Which sentence does not contain a misplaced or dangling modifier? Which clause in this sentence is used as an adjective?

Land that more than one individual owns jointly : 1. _____ property is an ownership fence, which applies to resources like land that more than one individual owns jointly.

Net present value if brisbane keeps using its current system : Assuming a discount rate of 8%, what is the net present value if Brisbane keeps using its current system?

Discuss the most likely forms of business : Select a small business with which you are familiar and discuss the most likely forms of business law it would need to be concerned about.

Ethics and social responsibility : Select a small business with which you are familiar and develop a plan of action for encouraging ethical behavior.

What is the approximate yield to maturity : What is the approximate yield to maturity for a 12-year bond that pays 10% interest on a $1000 face value annually if the bond sells for $950?

Discuss the old-earth creationist viewpoint : Do not discuss the old-earth creationist viewpoint on your chosen topic. For a description of old-earth creationism.

User Account

All Pages