A producer of synthetic motor oil for automobiles and light trucks has made the following statement: “One quart of Dynolube added to your next oil change will increase fuel mileage by one percent. This one-time additive will improve your fuel mileage over 50,000 miles of driving.” a. Assume the company’s claim is correct. How much money will be saved by adding one quart of Dynolube if gasoline costs $4.00 per gallon and your car averages 20 miles per gallon without the Dynolube? b. If a quart of Dynolube sells for $19.95, would you use this product in your automobile?
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- 6. At a price of $10.95 per gallon, what will be the DOL (assume 23000 gallons are sold , that $94400 above fixed costs is to be earned, and that other costs are as initially given)(show your calculations). IceLess is an anti-icing solution sold in gallon plastic jugs. It is poured into the windshield washer bottle of your car. Wash your windshield and the solution prevents the glass from icing over for about four hours. Production incurs the following fixed and variable costs. It is priced initially at $5.50 per gallon. Fixed costs (per year) Variable Costs per gallon Rent: $18000 Glycol: $1.50 Utilities: 13200 FreezeFree 312: .50 Managerial salaries: 20000 Mfg labor: .20 Flammability permit: 12000 Packaging: .20 Other fixed expense: 2400 Inert ingredients: .60 Total fixed: $65600 Advertising: .30…A company is trying to decide whether to buy a new delivery truck to replace their old one. The old truck originally cost $32,000. The new truck will cost $45,000. If they buy the new truck, they will sell the old truck to a used truck dealer for $4,000. Based on the information given, what is the immediate total incremental cost or benefit of buying the new truck? (Indicate a net benefit as a positive number and a net cost as a negative number.)As an oil refiner, you are able to produce $76 worth of unleaded gasoline from one barrel of Alaska North Slope (ANS) crude oil. Because of its lower sulfur content, you can produce $77 worth of unleaded gasoline from one barrel of West Texas Intermediate (WTI) crude. Another oil refiner is offering to trade you 10,150 Bbls of Alaska North Slope (ANS) crude oil for 10,000 Bbls of West Texas Intermediate (WTI) crude oil. Assuming you currently have 10,000 Bbls of WTI crude, what is the added benefit (cost) to you if you take the trade?
- 4. What is a Break-even Point and why do managers calculate it? 5. Branton Electric is considering the purchase of an entire cargo container filled with upgraded utility meters for $20,000. Branton can charge $50 for the installation of each upgraded meter, while the actual cost of the installation would be only $15. How many utility meter upgrades are necessary for Branton Electric to break even on this purchase? (Quick Start #16) 6. What are the advantages and disadvantages of using a conservative strategy of Capacity versus an Aggressive strategy?Darren Mack owns the Gas n’ Go convenience store and gasstation. After hearing a marketing lecture, he realizes thatit might be possible to draw more customers to his high-margin convenience store by selling his gasoline at a lowerprice. However, the Gas n’ Go is unable to qualify for volumediscounts on its gasoline purchases, and therefore cannot sellgasoline for profit if the price is lowered. Each new pump willcost $95,000 to install, but will increase customer traffic in thestore by 1,000 customers per year. Also, because the Gas n’Go would be selling its gasoline at no profit, Darren plans onincreasing the profit margin on convenience store items in-crementally over the next five years. Assume a discount rateof 8 percent. The projected convenience store sales per cus-tomer and the projected profit margin for the next five yearsare as follows: a. What is the NPV of the next five years of cash flows ifDarren had four new pumps installed?b. If Darren required a payback period of four…Darren Mack owns the Gas n’ Go convenience store and gasstation. After hearing a marketing lecture, he realizes thatit might be possible to draw more customers to his high-margin convenience store by selling his gasoline at a lowerprice. However, the Gas n’ Go is unable to qualify for volumediscounts on its gasoline purchases, and therefore cannot sellgasoline for profit if the price is lowered. Each new pump willcost $95,000 to install, but will increase customer traffic in thestore by 1,000 customers per year. Also, because the Gas n’Go would be selling its gasoline at no profit, Darren plans onincreasing the profit margin on convenience store items in-crementally over the next five years. Assume a discount rateof 8 percent. The projected convenience store sales per cus-tomer and the projected profit margin for the next five yearsare as follows:a. What is the NPV of the next five years of cash flows ifDarren had four new pumps installed?b. If Darren required a payback period of four…
- In the Philippines, gasoline price depends on supply and demand, as the price increases consumers are eager to drive farther than to fill their tank to save money. Assume you had been buying gasoline for P 2.90 per gallon and that it went up to P 2.98 per gallon at the station where you usually go. If you drive a Rusco pickup that gets 8 km/L, what is the round-trip distance you can drive to break even if it will take 20 gallons to fill your tank? Use an interest rate of 10% per year.Your company is contemplating replacing their current fleet of delivery vehicles with Nissan NV vans. You will be replacing 5 fully-depreciated vans, which you think you can sell for $4,400 a piece and which you could probably use for another 2 years if you chose not to replace them. The NV vans will cost $43,000 each in the configuration you want them, and can be depreciated using MACRS over a 5-year life, but you are unable to make use of either bonus depreciation or Section 179 expensing. Expected yearly before-tax cash savings due to acquiring the new vans amounts to about $5,100 each. If your cost of capital is 12 percent and your firm faces a 21 percent tax rate, what will the cash flows for this project be? (Round your answers to the nearest dollar amount.)Your company is contemplating replacing their current fleet of delivery vehicles with Nissan NV vans. You will be replacing 5 fully- depreciated vans, which you think you can sell for $3,100 a piece and which you could probably use for another 2 years if you chose not to replace them. The NV vans will cost $30,000 each in the configuration you want them, and can be depreciated using MACRS over a 5-year life, but you are unable to make use of either bonus depreciation or Section 179 expensing. Expected yearly before-tax cash savings due to acquiring the new vans amounts to about $3,800 each. If your cost of capital is 10 percent and your firm faces a 21 percent tax rate, what will the cash flows for this project be? (Round your answers to the nearest dollar amount.) FCF Year 1 6
- Night Shades Inc. (NSI) manufactures biotech sunglasses. These sunglasses sell for $150 each, and cost $70 each to produce. Night Shades Inc. has fixed costs of $100,000. Calculate Night Shades’ Breakeven point. how much profit (loss) will Night Shades have if it sells 500 sunglasses? 4,000 sunglasses? Night Shades’ manager expects an operating profit of $200,000. How many sunglasses must be sold to attain this profit?A company pays a sales representative 0.50 $ per kilometer in return for using its own car for company works. However, the company is considering another solution for this situation. So much so that the company will buy a car and make the car available to its representative. The data for this solution are as follows: The cost of buying such a car is 24,000 $ and it has a service life of 5 years. The market value at the end of this life is 7,000 $. The cost of keeping the car in a garage when it is not running is 2,500 $ per year, and the total fuel-tyre-maintenance costs are 0.30 $ per kilometer. If the interest rate is 15%, how many kilometers must the sales representative travel so that the costs of both methods are equal (break-even)? (please explain) a) 42.356 b) 43.107 c) 44.226 d) 45.340Honda Motor Company is considering offering a $2,100 rebate on its minivan, lowering the vehicle's price from $30,100 to $28,000. The marketing group estimates that this rebate will increase sales over the next year from 41,000 to 53,100 vehicles. Suppose Honda's profit margin with the rebate is $5,190 per vehicle. If the change in sales is the only consequence of this decision, what are its costs and benefits? Is it a good idea? Hint: View this question in terms of incremental profits. The cost of the rebate will be $ million. (Round to one decimal place.)