Question

A company is trying to reduce costs for one of its facilities by controlling its insulation....

A company is trying to reduce costs for one of its facilities by controlling its insulation. From the two options provided by the contractors, you will need to provide a recommendation for investment using the future cost method. With the interest rate of 14% and the initial cost of $37000, the first option will be painted every three years for $3000 for the duration of 12 years. It is estimated to save $6500 per year in energy. The second option can be installed for $14000 with no maintenance costs and will save $2600 per year.

Provide calculation as well as the cash flow diagram of these transactions.

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Parker County Community College (PCCC) is trying to determine whether to use no insulation or to...
Parker County Community College (PCCC) is trying to determine whether to use no insulation or to use insulation that is either 1 inch thick or 2 inches thick on its steam pipes. The heat loss from the pipes without insulation is expected to cost $1.30 per year per foot of pipe. A 1-inch thick insulated covering will eliminate 89% of the loss and will cost $0.40 per foot. A 2-inch thick insulated covering will eliminate 92% of the lost and...
A car manufacturer is considering one of two systems for its windshield assembly line.   The first...
A car manufacturer is considering one of two systems for its windshield assembly line.   The first is a robotic system that should save money due to a reduction in labor and materials costs. The robotic system will cost $400,000, and requires 1 full-time technician and 1 full-time material handler will be needed with this system.  The full-time technician costs $60,000 per year and the material handler costs $52,000 per year.  The expectation is to recover the cost of the robotic system over...
6.(12 pts.) Hastings Chemical Corporation is planning to expand one of its propylene manufacturing facilities. The...
6.(12 pts.) Hastings Chemical Corporation is planning to expand one of its propylene manufacturing facilities. The land costs $300,000, the building costs $600,000, the equipment costs $250,000, and a $100,000 start-up cost is required. It is expected that the product will result in sales of $625,000 per year for 12 years, at which time the land can be sold for $300,000, the building for $200,000, and the equipment for $50,000. The annual disbursements for labor, materials, and all other expenses...
X Company is considering replacing one of its machines in order to save operating costs. Operating...
X Company is considering replacing one of its machines in order to save operating costs. Operating costs with the current machine are $66,000 per year; operating costs with the new machine are expected to be $49,000 per year. The new machine will cost $70,000 and will last for 6 years, at which time it can be sold for $4,000. The current machine will also last for 6 more years but will have zero salvage value. Its current disposal value is...
X Company is considering replacing one of its machines in order to save operating costs. Operating...
X Company is considering replacing one of its machines in order to save operating costs. Operating costs with the current machine are $62,000 per year; operating costs with the new machine are expected to be $31,490 per year. The new machine will cost $157,000 and will last for four years, at which time it can be sold for $2,000. The current machine will also last for four more years but will not be worth anything at that time. It cost...
XYZ company is considering to acquire a machine in order to reduce its direct labor costs....
XYZ company is considering to acquire a machine in order to reduce its direct labor costs. This machine shall last for 4 years with no salvage value. Currently, the cash expenses amounted to $120,000 per year. The initial analysis indicated that the time-adjusted rate of return is 15%. At 12% (cost of capital to finance the purchase of the machine), the company expects net present value of $5,470.80. The present value of 1 for four period at 12% is 3.03735...
The Accidental Petroleum Company is trying to determine its weighted average cost of capital for use...
The Accidental Petroleum Company is trying to determine its weighted average cost of capital for use in making a number of investment decisions. The firm’s bonds were issued six years ago and have 12 years left until maturity. They carried a 9 percent coupon rate, and are currently selling for $974.50. The firm’s preferred stock carries a $5.20 dividend and is currently selling at $43.25 per share. Accidental’s investment banker has stated that issue costs for new preferred will be...
The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-assisted...
The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-assisted drilling system for its oil exploration business. Management has decided that it must use the system to stay competitive; it will provide $2.8 million in annual pretax cost savings. The system costs $7.5 million and will be depreciated straight-line to zero over five years. Wildcat's tax rate is 22 percent, and the firm can borrow at 6 percent. Lambert Leasing Company has offered to...
Case 1.1 Electronic Records Management (ERM) Spring Street Company (SSC) wanted to reduce the “hidden costs”...
Case 1.1 Electronic Records Management (ERM) Spring Street Company (SSC) wanted to reduce the “hidden costs” associated with its paper-intensive processes. Employees jokingly predicted that if the windows were open on a very windy day, total chaos would ensue as thousands of papers started to fly. If a flood, fire, or windy day occurred, the business would literally grind to a halt. The company’s accountant, Sam Spring, decided to calculate the costs of its paper-driven processes to identify their impact...
The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-assisted...
The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-assisted drilling system for its oil exploration business. Management has decided that it must use the system to stay competitive; it will provide $1.1 million in annual pretax cost savings. The system costs $6.8 million and will be depreciated straight-line to zero over four years. Wildcat's tax rate is 33 percent, and the firm can borrow at 11 percent. Lambert Leasing Company has offered to...