In a slow year, Deutsche Burgers will produce 2 million hamburgers at a total cost of $3.5 million. In a good year, it can produce 4 million hamburgers a total cost of$3.5 million. In a good year, it can produce 4 million hamburgers at a total cost of $4.5 million. What are the fixed and variable costs of hamburger production?

In a slow year, Deutsche Burgers will produce 2 million hamburgers at a total cost of $3.5 million. In a good year, it can produce 4 million hamburgers at a total cost of$4.5 million.
d. What is the average cost when the firm produces 2 million hamburgers?

Suppose that Blooper’s customers paid their bills with an average 3-month delay (instead of 2 months) and that Blooper’s inventories were 20% rather than 15% of next year’s expenses. a. Would project NPV be higher or lower than that in the worked example in the chapter? b. Calculate Blooper’s working capital in each year of its project. c. What is the change in project NPV (use the Blooper spreadsheet)?

Compare McDonald's old and current processes for making hamburgers. How valid is McDonald's claim that the new process will produce fresher hamburgers for the customer? Comparing McDonald's current process to the processes used by Burger King and Wendy's, which process would appear to produce the freshest hamburgers ?

Better Mousetrap’s research laboratories have developed a new trap. The project requires an initial investment in plant and equipment of $6 million. This investment will be depreciated straight-line over five years to a value of zero, but when the project comes to an end at the end of five years, the equipment will, in fact, be sold for$500,000. The firm believes that working capital at each date must be maintained at 10% of next year’s forecasted sales starting immediately. Production costs are estimated at 25% of revenues. (There are no marketing expenses.) Sales forecasts are given in the following table. The firm pays tax at 25% and the required return on the project is 12%. What is the NPV?

$$\begin{array}{|lcccccc|} \hline \text { Year } & 0 & 1 & 2 & 3 & 4 & 5 \\ \hline \text { Sales (millions of dollars) } & 0 & 2.0 & 2.4 & 4.0 & 4.0 & 2.4 \\ \hline \end{array}$$

Project Evaluation. The efficiency gains resulting from a just-in-time inventory management system will allow a firm to reduce its level of inventories permanently by $250,000. What is the most the firm should be willing to pay for installing the system?

The efficiency gains resulting from a just-in-time inventory management system will allow a firm to reduce its level of inventories permanently by $250,000. What is the most the firm should be willing to pay for installing the system?

Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $100. The materials cost for a standard diamond is$40. The fixed costs incurred each year for factory upkeep and administrative expenses are $200,000. The machinery costs$1 million and is depreciated straight-line over 10 years to a salvage value of zero. a. What is the accounting break-even level of sales in terms of number of diamonds sold?

Edison Systems has estimated the cash flows over the 5 -year lives of two projects, A and B. These cash flows are summarized in the table below. a. If project $A$ were actually a replacement for project $B$ and if the $\$ 12,000$ initial investment shown for project $B$ were the after-tax cash inflow expected from liquidating it, what would be the appropriate cash flows for this alternate decision?

$$\begin{array}{lrr} & \text{Project A}&\text{Project B}\\ \hline\\ \text{Initial investments}& \$40,000 & \$12,000^a\\ \hline\\ \text{Years(t)} & & \hspace{-15mm}\text{Operating cash inflows}&\\ \hline 1 & \$10,000&\$6,000\\ 2 & 12,000 & 6,000\\ 3 & 14,000 & 6,000\\ 4& 16,000 & 6,000\\ 5 & 20,000 & 6,000\\ \hline\\ ^a \text{After tax cash inflow expected from liquidation.} \end{array}$$

A silver mine can yield 10,000 ounces of silver at a variable cost of $32 per ounce. The fixed costs of operating the mine are$40,000 per year. In half the years, silver can be sold for $48 per ounce; in the other years, silver can be sold for only$24 per ounce. Ignore taxes. a. What is the average cash flow you will receive from the mine if it is always kept in operation and the silver always is sold in the year it is mined? b. Now suppose you can shut down the mine in years of low silver prices. What happens to the average cash flow from the mine?

In a slow year, Deutsche Burgers will produce 2 million hamburgers at a total cost of $3.5 million. In a good year, it can produce 4 million hamburgers at a total cost of$4.5 million.
a. What are the fixed costs of hamburger production?

In a slow year, Deutsche Burgers will produce 2 million hamburgers at a total cost of $3.5 million. In a good year, it can produce 4 million hamburgers at a total cost of$4.5 million.
e. Why is the average cost lower when more burgers are produced?

Expansion versus replacement cash flows Edison Systems has estimated the cash flows over the 5 -year lives for two projects, A and B. These cash flows are summarized in the table below.

"After-tax cash inflow expected from liquidation. a. If project A were actually a replacement for project B and the $12,000 initial investment shown for project B were the after-tax cash inflow expected from liquidating it, what would be the relevant cash flows for this replacement decision?

A firm had after-tax income last year of $1.2 million. Its depreciation expenses were$.4 million, and its total cash flow was $1.2 million. What happened to net working capital during the year?