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# Hadm 2250 Homework Assignment 5

• Date Submitted: 03/05/2016 06:00 AM
• Flesch-Kincaid Score: 73
• Words: 670
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1. You are evaluating two different silicon wafer milling machines. The Techron I costs \$240,000, has a three-year life, and has pretax operating costs of \$63,000 per year. The Techron II costs \$420,000, has a five-year life, and has pretax operating costs of \$36,000 per year. For both milling machines, use straight-line depreciation to zero over the project’s life and assume a salvage value of \$40,000. If your tax rate is 35 percent and your discount rate is 10 percent, compute the EAC for both machines.

2. Dahlia Enterprises needs someone to supply it with 120,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you’ve decided to bid on the contract. It will cost you \$870,000 to install the equipment necessary to start production; you’ll depreciate this cost straight-line to zero over the project’s life. You estimate that in five years, this equipment can be salvaged for \$70,000. Your fixed production costs will be \$325,000 per year, and your variable production costs should be \$10.30 per carton. You also need an initial investment   in net working capital of \$75,000. If your tax rate is 35 percent and you require a 12 percent return on your investment, what bid price should you submit?

3. Consider a project to supply 100 million postage stamps per year to the U.S. Postal Service for the next five years. You have an idle parcel of land available that cost \$1,900,000 five years ago; if the land were sold today, it would net you \$2,100,000 aftertax. The land can be sold for \$2,300,000 after taxes in five years. You will need to install \$5.4 million in new manufacturing plant and equipment to actually produce the stamps; this plant and equipment   will be depreciated straight-line to zero over the project’s five-year life. The equipment can be sold for \$500,000 at...