A manufacturing company is evaluating two options for new equipment to introduce a new product to its suite of goods. The details for each option are provided below:
· $65,000 for equipment with useful life of 7 years and no salvage value.
· Maintenance costs are expected to be $2,700 per year and increase by 3% in Year 6 and remain at that rate.
· Materials in Year 1 are estimated to be $15,000 but remain constant at $10,000 per year for the remaining years.
· Labor is estimated to start at $70,000 in Year 1, increasing by 3% each year after.
Revenues are estimated to be:
· $85,000 for equipment with useful life of 7 years and a $13,000 salvage value
· Maintenance costs are expected to be $3,500 per year and increase by 3% in Year 6 and remain at that rate.
· Materials in Year 1 are estimated to be $20,000 but remain constant at $15,000 per year for the remaining years.
· Labor is estimated to start at $60,000 in Year 1, increasing by 3% each year after.
Revenues are estimated to be:
The company’s required rate of return is 8%.
Management has turned to its finance and accounting department to perform analyses and make a recommendation on which option to choose. They have requested that the four main capital budgeting calculations be done: NPV, IRR, Payback Period, and ARR for each option.
For this assignment, compute all required amounts and explain how the computations were performed. Evaluate the results for each option and explain what the results mean. Based on your analysis, recommend which option the company should pursue.
Superior papers will:
· Perform all calculations correctly.
· Articulate how the calculations were performed, including from where values used in the calculations were obtained.
· Evaluate the results computed and explain the meaning of the results, including why certain measurements are more accurate than others.
· Recommend which option to pursue, supported by well-thought-out rationale, and considering any other factors that could impact the recommendation.
Be sure to use APA formatting in your paper. Purdue University’s Online Writing Lab (OWL) is a free website that provides excellent information and resources for understanding and using the APA format and style. The OWL website can be accessed here: https://owl.purdue.edu/owl/research_and_citation/apa_style/apa_style_introduction.html
This assignment will be assessed using the BUS 5110 Unit 6 Written Assignment rubric.
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.Read more
Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.Read more
Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.Read more
By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.Read more