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jekas [21]
3 years ago
14

Carlisle Company has been cited and must invest in equipment to reduce stack emissions or face EPA fines of $18,500 per year. An

emission reduction filter will cost $75,000 and have an expected life of 5 years. Carlisle’s MARR is 10%/year.
a. What is the annual worth of this investment?
b. Is the filter economically justified? Why?
Business
1 answer:
Ahat [919]3 years ago
3 0

Answer:

equivalent annual cost: 19,784.81

The investment is not economically justified as it is cheaper to pay the fines than invest in the equipment to avoid them.

Explanation:

We calcualte the PMT of a 75,000 dollars equipment at 10%

PV \div \frac{1-(1+r)^{-time} }{rate} = C\\

PV 75,000

time 5

rate 0.1

75000 \div \frac{1-(1+0.1)^{-5} }{0.1} = C\\

C                 $ 19,784.811

EPA fines:    <u>   </u><u>$ 18,500.00  </u>

differential:          (1, 284.81)

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Non-toxic-toys currently has $400,000 of equity and is planning a $160,000 expansion to meet increasing demand for its product.
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1. $100,000 and 25%

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3. $150,000 and 27%

Explanation:

1. It does not expand

    a. Net income= $100,000 (as given in the question)

    b. Return on equity= (net income)/(shareholder’s equity)

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b. Return on equity= (net income)/(shareholder’s equity)

= 137200/400000

=0.343  or 34.3%

3. It expands and raises equity of $160000

a. Net Income= $100000 + 50000

= $150000

b. Return on equity= (net income)/(shareholder’s equity)

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Where ($560,000) 400000 + 160000 is shareholder’s equity

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What is meant by the term “overhead” as it relates to a company’s financial<br> Operations?
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Explanation:

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