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trasher [3.6K]
3 years ago
13

Company C has a machine that, working alone at its constant rate, processes 100 units of a certain product in 5 hours. If Compan

y C plans to buy a new machine that will process this product at a constant rate and if the two machines, working together at their respective constant rates, are to process 100 units of this product in 2 hours, what should be the constant rate, in units per hour, of the new machine?
A. 50
B. 45
C. 30
D. 25
Business
1 answer:
Elza [17]3 years ago
7 0

Answer:

C. 30

Explanation:

If the first machine processes 100 units in 5 hours,

Number of units in 1 hour = 100/5

                                          = 20 Units

In 2 hours, this machine would process

= 2 × 20

= 40 Units

Therefore where there are 100 units to be processed in 2 hours, the first  machine would process 40 units in the given time

The new machine would have to process the remaining

Number of units to be processed by new machine

= 100 - 40

= 60 Units

If the machine is to process 60 units in 2 hours, constant rate, in units per hour, of the new machine

= 60/2

= 30 units per hour

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  • The net present value of this project is: $77,930.58 (assuming a value for the sale of the business equal to the purchase price).

Explanation:

For this problem, the first and basic question is:

  • <em>Prepare a net present value calculation for this project. What is the net present value of this project?</em>

<em />

<h2>Solution</h2>

The net present value is equal to: the present value of the future cash flows less present value of the investements.

<u>1. Present value of the future cash flows:</u>

The discount factor is equal to 1 / [1 + (1 + r)ⁿ]

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1            $30,000       1/(1 + 0.05)             $30,000/1.05 = $28,571.43

2           $30,000       1/(1 + 0.05)²           $30,000/(1.05)² = $27,210.88

3           $30,000       1/(1 + 0.05)³           $30,000/(1.05)³ = $25,915.13

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*For the year 5 you must also consider the value of the business, which is unknow. You should have some information about it. Although unrealistic, at this stage we can just assume a value: let's say it is the same purchase price: $240,000. That is what the last line shows:

The discount the value of the value of the business is:

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