Assignment
You are thinking of opening a small copy shop. It costs $5000 to rent a copier for a year and costs $0.03 per copy to operate the copier. Other fixed costs of running the store will amount to $400 per month. You plan to charge an average of $0.10 per copy, and the store will be open 365 days per year. Each copier can make up to 100,000 copies per year.
a. For 1 to 5 copiers rented and daily demands of 500, 1000, 1500, and 2000 copies per day, compute annual profit. That is, compute annual profit for each of these combinations of copiers rented and daily demand.
b. If you rent 3 copiers, what daily demand for copies will allow you to break even?
c. Graph profit as a function of the number of copiers for a daily demand of 500 copies; for a daily demand of 2000 copies. Interpret your graphs.
You expect to sell 1,600 units of the thin client computers in the first year for $1,800 each. You hope to double unit sales each year for the next five years. However, you expect that competition will force a 15% decline in price each year. Fortunately, technical progress allows initial variable manufacturing costs of $1,000 for each unit to decline by 6% per year. Fixed costs are estimated to be $1,000,000 per year. Marketing expense is projected to be 14% of annual revenue. When it becomes profitable to do so, you will lease an automated assembly machine that reduces variable manufacturing costs by 20% but doubles the annual fixed cost; the new variable manufacturing cost will also decline by 6% per year. Net present value (NPV) will be used to aggregate the stream of annual profits, discounted at 15% per year.
Ignoring tax considerations, build a spreadsheet for the venture capitalist to answer these questions:
1. Create spreadsheets
1. How many units do you need to sell in the first year to break even in the first year?
2. How many units must you sell in the first year to break even in the second year?
3. Calculate NPV
You want to examine the relationship between the number of machines working and the number of processing minutes achieved. You conduct 18 spot checks every half hour and record the following data. Create an x-y scatter plot of the data and comment about its.
What would happen if you plotted this data using a different chart type? Ex, a line chart.
Assume the demand for the drug Wozac during the current year is 50,000, and assume demand will grow at 5% a year. If you build a plant that can produce x units of Wozac per year, it will cost $16x. Each unit of Wozac is sold for $3. Each unit of Wozac produced incurs a variable production cost of $0.20. It costs $0.40 per year to operate a unit of capacity. Determine how large a Wozac plant to build to maximize expected profit over the next 10 years.