Posted: April 19th, 2016

Calculate the number of pounds of raw materials to be purchased in each of the months of September and October?

5.The following data have been collected by capital budgeting analysts at Rykers concerning an investment in an expansion of the company’s product line. Analysts estimate that an investment of $210,000 will be required to initiate the project at the beginning of 2010. Estimated cash returns from the new product line are summarized in the following table; assume that the returns will be received in a lump sum at the end of
each year.
Amount of
Year Cash Return
2010 $90,000
2011 80,000
2012 70,000
2013 60,000

The new product line will also require an investment in working capital of $30,000; this investment will become available for other purposes at the end of the project. Salvage value of machinery and equipment at the end of the product line’s life is expected to be $20,000. The cost of capital used in Rykers capital budgeting analysis is 10%.

Required:
A) Calculate the net present value of the proposed investment. Ignore income taxes.
B) Calculate the present value ratio of the investment.
C) Calculate the payback period of the investment.

6. Ping Rentals, Inc., has actual sales for July and August and forecasted sales for September, October, November, and December as follows:
Actual:
July 5,900 units
August 6,200 units
Forecast:
September 6,000 units
October 6,800 units
November 5,600 units
December 6,100 units

Additional Information:
The firm’s policy is to have finished goods inventory on hand at the end of the month that is equal to 70 percent of the next month’s sales. It is currently estimated that there will be 4,200 units on hand at the end of August.

Each unit of finished product requires 6.5 pounds of raw materials. The firm’s policy is to have raw material inventory on hand at the end of each month that is equal to 60 percent of the next month’s estimated usage. It is currently estimated that 26,000 pounds of raw materials will be on hand at the end of August.

Required:
A) Calculate the number of units to be produced in each of the months of September, October, and November.
B) Calculate the number of pounds of raw materials to be purchased in each of the months of September and October.

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