The Toy Company A toy company in business for seventy years has consistent sales of $20 million per annum. It has recently secured a contract with a television network allowing the toy company to create a board game from a phenomenally successful show. The toy company estimates sales will be $50 million in the first year, $20 million in the second year, and $10 million in the third year. Discuss some of the considerations the toy company should take into account when costing and pricing the new product.
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- The Tamarind Inc. is considering the acquisition of a merchandise picking system to improve customer service. Annual cash returns on investment cost of P1.2 million is P220,000. Useful life is estimated at 8 years. The company’s cost of capital is 14% and income tax rate is 35%. Calculate Tamarind, Inc.’s payback reciprocal for this investment. 18.3% 22.2% 11.9% 20.5%WJW Ceramic Products Inc. leases plant facilities in which firebrick are manufactured. Because of rising demand, WJW could increase sales by investing in new equipment to expand output. The selling price of $2.50 per brick will remain unchanged if output and sales increase. Based on engineering and cost estimates, the accounting department provides managers with the following forecast estimates based on an annual increased output of 400,000 bricks: Cost of new equipment having an expected life of ten years $500,000 Equipment installation cost $ 20,000 Expected salvage value $ 75,000 Additional annual utility expenses $ 40,000 Additional annual labor costs $ 160,000 Additional annual cost for raw material $ 400,000 CCA 30% (50% rule applicable) of depreciation will be used, and taxes are paid at a rate of 40%. WJW policy is not to invest capital in projects earning less than…WJW Ceramic Products Inc. leases plant facilities in which firebrick are manufactured. Because of rising demand, WJW could increase sales by investing in new equipment to expand output. The selling price of $2.50 per brick will remain unchanged if output and sales increase. Based on an engineering and cost estimates, the accounting department provides managers with the following forecast estimates based on an annual increased output of 400,000 bricks: Cost of new equipment having an expected life of five years $500,000 Equipment installation cost $20,000 Expected salvage value $75,000 Additional annual utility expenses $40,000 Additional annual labor costs $160,000 Additional annual cost for raw material $400,000 CCA 30% (50% rule applicable) of depreciation will be used, and taxes are paid at a rate of 40%. WJW policy is not to invest capital in projects earning less than 20% rate of return. SHOULD THE PROPOSED EXPANSION BE UNDERTAKEN?
- A company purchases a component, which is critical in the production process, from an international supplier. Recently, quality problems with this component have increased. For this reason, managers of the company are considering of producing this part in-house. The economic life of the new production system will be 8 years. The savings and expenditures related to the new production system are given below. The MARR is 15%. According to the information, answer the questions from 8 to 9. Capital expenditures (Investment costs): Building: 500,000 TL Machines and equipment: 2,200,000 TL The annual saving from material and quality control: 5,000,000 TL Annual operating cost: 1,500,000 TL Annual income tax: 800,000 TL Salvage value: 1,500,000 TL 8. What is the discounted payback period of the new production system? A.Less than 1 year B.1 year C.between 1 and 2 years D.between 2 and 3 years 9. What is the net present worth of the new production system? A.9,415,000 TL…Toshovo Computer owns four production plants at which computer workstations are produced. The company can sell up to 40,000 computers per year at a price of $1500 per computer. For each plant, the production capacity, the production cost per computer,and the fixed cost of operating a plant for a year are given in the file P06_56.xlsx. Determine how Toshovo can maximize its yearly profit from computer production.Thomasville Furniture Industries offers several types of high-performance fabrics that are capable of withstanding chemicals as harsh as chlorine. A Midwestern manufacturing company that uses fabric in several products has a report showing that the present worth of fabric purchases over a specified 5-year period was $900,000. If the costs are known to have increased geometrically by 5% per year during that time and the company uses an interest rate of 15% per year for investments, what was the cost of the fabric in year 1?
- A software company that installs systems for inventory control using RFID technology spent $600,000 per year for the past 3 years in developing their latest product. The company optimistically hopes to recover its investment in 5 years on a single contract beginning immediately (year 0). The company is negotiating a contract that will pay $250,000 now and a to-beagreed- upon annual increase of a constant amount each year through year 5. How much must the income increase (an arithmetic gradient) each year, if the company wants to realize a return of 15% per year?A software company that installs systems for inventory control using RFID technology spent $720,000 per year for the past 3 years in developing their latest product. The company optimistically hopes to recover its investment in 5 years on a single contract beginning immediately (year 0). The company is negotiating a contract that will pay $285,000 now and a to-be-agreed-upon annual increase of a constant amount each year through year 5. How much must the income increase (an arithmetic gradient) each year if the company wants to realize a return of 13% per year?A manufacturing company leases a building for $100,000 per year for its manufacturing facilities. In addition, the machinery in this building is being paid for in installments of $20,000 per year. Each unit of the product produced costs $15 in labor and $10 in materials. The product can be sold for $40. Use this information to solve, If 10,000 units per year are sold, what is the annual profit? (a) $280,000 (b) $50,000 (c) $150,000 (d) −$50,000 (e) $30,000. Select the closest answer.
- Desk company has a product that it currently sales in the market for $50 per unit. Desk has develop in new feature that, if added to existing product, will allow Desk to receive a price of $65 per unit. The total cost of adding this new future is $44,000 and Desk expects to sell 2,800 units in the coming year. What is the net effect on the next-year's operating income of adding the feature to the product?A piece of labor-saving equipment has just come onto the market that Mitsui Electronics, Limited, could use to reduce costs in one of its plants in Japan. Relevant data relating to the equipment follow: Purchase cost of the equipment Annual cost savings that will be provided by the equipment Life of the equipment $ 600,000 $ 100,000 12 years Required: 1a. Compute the payback period for the equipment. 1b. If the company requires a payback period of four years or less, would the equipment be purchased? 2a. Compute the simple rate of return on the equipment. Use straight-line depreciation based on the equipment's useful life. 2b. Would the equipment be purchased if the company's required rate of return is 12%? Complete this question by entering your answers in the tabs below. ces Reg 1A Reg 18 Req 2A Req 28 Compute the simple rate of return on the equipment. Use straight-line depreciation based on the equipment's useful life. (Round your answer to 1 decimal place i.e. 0.123 should be…QUESTION IS IN IMAGE Your company has been doing well, reaching $1.09 million in earnings, and is considering launching a new product. Designing the new product has already cost $513,000. The company estimates that it will sell 814,000 units per year for $2.99 per unit and variable non-labor costs will be $1.03 per unit. Production will end after year 3. New equipment costing$1.12 million will be required. The equipment will be depreciated to zero using the 7-year MACRS schedule. You plan to sell the equipment for book value at the end of year 3. Your current level of working capital is $301,000. The new product will require the working capital to increase to a level of $381,000 immediately, then to $400,000 in year 1, in year 2 the level will be $354,000, and finally in year 3 the level will return to$301,000. Your tax rate is 21%. The discount rate for this project is 9.8%. Do the capital budgeting analysis for this project and calculate its NPV.Note: Assume that the equipment is put…