Week-7 A. Najat Engineering Company LLC wants to acquire new computer software t
ID: 1106447 • Letter: W
Question
Week-7 A. Najat Engineering Company LLC wants to acquire new computer software to work with its clients at AED. 300,000 and the projected benefits for the next three years are as under Net Cash Flow AED 300,000 Year Beginning of the year I End of the year End of the year 2 End of the year 97,600 109,416 223,040 Required to: Assess the economic feasibility of above investment related to the engineering project of Najat Engineering Company LLC when the Minimum Acceptable Rate of Return (MARR) is(15% and comment thoroughly on the results B. A purchase manager of a large merchandising firm has called your General Manager for production to get a price quote for an additional 1,000 units of a given product. The vice president has asked you to prepare a cost estimate. The number oTourTequired to produce a unit of 50. The average labor rate is S120 per hour, The materials cost $140 per unit. Overhead for an additional 1,000 units is estimated at ofthedirectlabor cos If the comp any wants to have a 30% profit margin, what should be the unit price to quote? C. Answer the following: L You deposit $ 10,000 in a savings account that earns 7.5% simple interest per year, what is the minimum number of years you must wait to double your balance? Suppose instead that you deposit the $10,000 in another savings account that earns 7% interest compounded yearly. How many years will it take now to double your balance? 2.You are considering investing AED30,000 at an interest rate of 8% compounded annually for five years or investing the AED·30,000 at 9% per year simple interest for five years. which option is better and why? 3. The average price of a new home is AED.1,800,000. If new home prices are increasing at a rate of 6% per year, how much will a new home cost in 10 years? D. Three purchase plans are available for a new car. Plan A: AED. 5,000 cash immediately Plan B: AED. 1,500 down and 36 monthly payments of AED. 116.25 Plan C: AED. 1,000 down and 48 monthly payments of AED. 120.50 If a customer expects to keep the car five years and her cost of money is 18% compounded monthly, which payment plan should she choose? E. Majid Engineering LLC purchased a machine for AED.200,000 two years ago. The company expected this machine to have a five-year life and a salvage value of AED. 50,000. The company spent AED.50,000Explanation / Answer
A.
Initial investment = AED 300000
MARR (R) = 15%
Net present value of the investment = Present value of the cash inflows – initial investment
Net present value of the investment = 97600/(1+R) + 109416/(1+R)^2 + 223040/(1+R)^3 – 300000
Net present value of the investment = 97600/(1+15%) + 109416/(1+15%)^2 + 223040/(1+15%)^3 – 300000
Net present value of the investment = AED14256.2
The investment project is economically feasible and the company should take up this investment as it gives the positive net present value of AED14256.2. It means that by taking up this investment, the company will get wealthier by AED14256.2. Hence, it will be a good decision to opt for this investment.
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