Question 1 Whispering Winds Company manufactures automobile components for the w

Question

Question 1

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:

Whispering Winds Company uses a 12% discount rate.

Calculate the net present value of Whispering Winds’s proposed investment in CIM. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 0 decimal place, e.g. 58,971. Enter negative amounts using a negative sign preceding the number, e.g. -59,991 or parentheses, e.g. (59,991).)

Initial equipment cost $ 6,108,000 Working capital required at start-up $ 610,800 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 $ 610,800 Useful life of equipment 10 years

Explanation / Answer

Please provide feedback... Thanks in advance.. :-)

(A) 1 Initial equipment cost $ 61,08,000 2 Working capital required at start-up $ 6,10,800 3 Salvage value of existing equipment $ 76,350 4 Annual operating cost savings $ 8,55,120 5 Salvage value of new equipment at end of its useful life $ 2,03,600 6 Working capital released at end of its useful life $ 6,10,800 7 Useful life of equipment 10 years Initial Cash flows = (3-1-2) -66,42,450 Annual Cash flows (4) 8,55,120 Terminal Cash flows(5+6) 8,14,400

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.