Whispering Winds Company manufactures automobile components for the worldwide market. The company has three largeproduction facilities in Virginia, New Jersey, and California, which have been operating for many years. Brett Harker, vice president ofproduction, believes it is time to upgrade operations by implementing computer-integrated manufacturing (CIM) at one of the plants.Brett has asked corporate controller Connie Carson to gather information about the costs and benefits of implementing CIM. Carsonhas gathered the following data:Initial equipment cost$ 6,174,000Working capital required at start-up$600,000Salvage value of existing equipment76,350Annual operating cost savings855,120Salvage value of new equipment at end of its useful life203,600Working capital released at end of its useful life600,000Useful life of equipment10 yearsWhispering Winds Company uses a 12% discount rate.Click here to view the factor table$$$$ Your answer is partially correct.Andrew Burr, manager of the Virginia plant, has been looking over Carson's information and believes she has missed someimportant benefits of implementing CIM. Burr believes that implementing CIM will reduce scrap and rework costs by $152,700per year. The CIM equipment will take up less floor space in the factory than the old equipment, freeing up 6,000 square feet ofspace for a planned new research facility. Initial plans called for renting additional space for the new facility, at a cost of $20 persquare foot. Calculate a revised net present value and internal rate of return using this additional information. (For calculationpurposes, use 4 decimal places as displayed in the factor table provided and round final answer to 0 decimal places, e.g.58,971. Round internal rate of return to 2 decimal places, e.g. 15.26%.)INet present valueInternal rate of return%Does your recommendation change as a result of this new information?Yes :$

Answered: Image /qna-images/answer/c6c4cb34-e53a-4544-a18a-5e10c91c9647.jpg

Whispering Winds Company manufactures automobile components for the worldwide market. The company has three large production facilities in Virginia, New Jersey, and California, which have been operating for many years. Brett Harker, vice president of production, believes it is time to upgrade operations by implementing computer-integrated manufacturing (CIM) at one of the plants. Brett has asked corporate controller Connie Carson to gather information about the costs and benefits of implementing CIM. Carson has gathered the following data: Initial equipment cost $ 6,174,000 Working capital required at start-up $ 600,000 Salvage value of existing equipment $ 76,350 Annual operating cost savings $ 855,120 Salvage value of new equipment at end of its useful life $ 203,600 Working capital released at end of its useful life $ 600,000 Useful life of equipment 10 years Whispering Winds Company uses a 12% discount rate Click here to view the factor table

Whispering Winds Company manufactures automobile components for the worldwide market. The company has three large production facilities in Virginia, New Jersey, and California, which have been operating for many years. Brett Harker, vice president of production, believes it is time to upgrade operations by implementing computer-integrated manufacturing (CIM) at one of the plants. Brett has asked corporate controller Connie Carson to gather information about the costs and benefits of implementing CIM. Carson has gathered the following data: Initial equipment cost $ 6,174,000 Working capital required at start-up $ 600,000 Salvage value of existing equipment $ 76,350 Annual operating cost savings $ 855,120 Salvage value of new equipment at end of its useful life $ 203,600 Working capital released at end of its useful life $ 600,000 Useful life of equipment 10 years Whispering Winds Company uses a 12% discount rate Click here to view the factor table

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter11: Strategic Cost Management

Section: Chapter Questions

Problem 4CE: Kagle design engineers are in the process of developing a new green product, one that will...

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