i need the answer quickly Transcribed Image Text: 2. Three different products are manufactured in an existing batch process. The details are as follows: Product
i need the answer quickly Transcribed Image Text: 2. Three different products are manufactured in an existing batch process. The
details are as follows:
The cost of manufacturing is $0.75 million/y. The demand for these products is
increasing, and the crystallization step has been determined to be the bottleneck to
increasing the capacity. It is desired to add 25% capacity to this process. The internal
hurdle rate for process improvements is 17% p.a. over five years.
a. If a new batch crystallizer, which allows for a 25% capacity increase, costs
$850,000, do you recommend this process improvement?
b. Capital funds are tight, and it has been determined that the maximum investment
possible is $600,000, resulting in a smaller new crystallizer. Using this crystallizer,
identical profitability as found in Part (a) has been determined. Determine what
capacity increase results from purchasing the smaller crystallizer.
c. Suppose that it is now possible to purchase the $850,000 crystallizer, thereby
increasing capacity by 25%. However, the purchase of this crystallizer requires
that the DCFROR (for this incremental investment) be at least 40% over five
years. Is this DCFROR reached?
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