ps1 - FIN300 Introduction to Managerial Finance Professor H...

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FIN300 Introduction to Managerial Finance Professor H. Wang Problem Set #1 Due: Friday, January 29, 2010 Please make sure to write clearly the name of each member in the group. Please turn in your solutions at the beginning of the lecture on the due date. Late submissions or submissions by groups larger than four students will not be accepted. 1. Monsanto Corporation is considering the renovation and/or replacement of some of its older and outdated carpet-manufacturing equipment. The cash outlay for new equipment would be approximately $600,000. The net book value of the old equipment and its potential net selling price is $250,000. The total benefits from the new equipment (measured in today’s dollars) would be $900,000. The benefits of the old equipment over a similar period of time (measured in today’s dollars) would be $300,000. a.) What is the marginal benefits of the proposed new equipment? b.) What is the marginal cost of the proposed new equipment?
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