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Unformatted text preview: Homework 26 Solution
8.4 For the French plant, the breakeven point is Q FC
$3,500,000 761 hwt
r v $8500 $3900 For the American plant, the breakeven point is Q
8.6 FC
$2,650,000 1019 hwt
r v $12,500 $9900 For the French plant, the profit is
Profit r v Q FC $8500 $3900 950 $3,500,000 $870,000
For the American plant, the profit is
Profit r v Q FC $12,500 $9900 850 $2,650,000 $440,000 8.7 For the French plant we can write the profit equation in terms of a variable cost v and set it equal to the
$1,000,000 goal:
Profit $8500 v 950 $3,500,000 $1,000,000 $8500 v 950 $4,500,000 $8500 v $4,500,000 950 $4737 v $8500 $4737 $3763 per hwt
This requires a reduction of
$3900 $3763 $137 per hwt or
$3900 $3763 100% 3.5%
$3900
in the variable costs.
For the American plant:
Profit $12,500 v 850 $2,650,000 $1,000,000 $12,500 v 850 $3,650,000 $12,500 v $3,650,000 850 $4294 v $12,500 $4294 $8206 per hwt This requires a reduction of $9900 $8206 $1694 per hwt
or $9900 $8206 100% 17.1%
$9900
in the variable costs.
8.11 Brittany needs to determine the initial cost that lets Regency Aircraft earn a return of exactly 8% per
year (their MARR). One way to do that is to write an equation for the present worth as a function of the
unknown initial cost X, set it equal to zero (which means earning exactly the MARR) and solve for X:
6.7101 0.4632 PW X $15,000 P  A,8%,10 0.20X P  F,8%,10 0
X $15,000 6.7101 0.20X 0.4632 X 0.09264X $100,651
0.90736X $100,651
X $110,928 So Regency Aircraft has to keep their initial costs below $110,928 in order to achieve their 8% MARR.
8.12 Let R represent the revenue in Years 2–8. In Year 1, the net revenue is $50,000 – $42,000 = $8000. In
Years 2–8 (a period of 7 years), the net revenue is (R – $42,000). The present worth equation can be
written in terms of the unknown revenue as
4.8684 PW $150,000 $8000 1.10 R $42,000 P  A,10%,7 1.10 $20,000 1.10 1 1 8 Setting this equal to zero and solving for R:
4.8684 $150,000 $8000 1.10 R $42,000 P  A,10%,8 1.10 $20,000 1.10 0
1 1 8 4.4258 R $42,000 $133,397 R $42,000 $30,141
R $72,141
So the National Potato Cooperative needs to earn at least $72,141 per year in Years 2–8 to recoup their
investment in the deskinning machine with a 10% return. ...
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 Fall '08
 Moore,L

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