Baldwin Corporation is considering adding capacity to their Bell product, currently automated to 7.0. Assume:
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- They will use the new capacity next year to make and sell 200 additional units (000).
- Each unit of capacity will cost $34.00.
- Bell's price will be unchanged at $34.00.
- Material costs will remain $13.04 next year.
- Labor costs will remain $5.34 on first shift, and $7.91 on second shift.
- Bond interest will remain 10.8% next year.
- Depreciation will be straight line over 15 years.
- SG&A costs can be ignored because they would be the same with or without the new capacity.
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Which of the following tactics will yield the highest ROI in their first year of production?
Select: 1
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Buy 100 units of capacity. Finance the $3,400 purchase entirely with a new bond.
Buy 100 units of capacity. Finance the $3,400 purchase entirely with a stock issue.
Buy 200 units of capacity. Finance the $6,800 purchase entirely with a new bond.
Buy 200 units of capacity. Finance the $6,800 purchase entirely with a stock issue.
Answers
Status NEW
Posted 26 May 2017 07:05 AM
My Price 6.00
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