13. An aircraft push truck costs $2,000,000 with an annual operating and maintenance (O&M) cost of $30,000. If the service life of the elevator is 20 years and minimum acceptable rate of return (i) is 10%, then its present worth (cost) will be: a. 2,030,000 b. 2,255,407 c. 2,445,200 d. 2,600,000

13. An aircraft push truck costs $2,000,000 with an annual operating and maintenance (O&M) cost of $30,000. If the service life of the elevator is 20 years and minimum acceptable rate of return (i) is 10%, then its present worth (cost) will be: a. 2,030,000 b. 2,255,407 c. 2,445,200 d. 2,600,000

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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13.
An aircraft push truck costs $2,000,000 with an annual operating and maintenance
(O&M) cost of $30,000. If the service life of the elevator is 20 years and minimum
acceptable rate of return (i) is 10%, then its present worth (cost) will be:
a. 2,030,000
b. 2,255,407
c. 2,445,200
d. 2,600,000

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5
6. A company is considering two alternatives for manufacturing a certain part. Method R will have a first cost of $40,000, and annual operating cost of $25,000, and a $10,000 salvage value after its five-year life. Method S will have an initial cost of $100,00, an annual operating cost of $15,000 and a $12,000 salvage value after its 10-year life. At an interest rate of 12% per yr, the present worth values of the alternatives are closest to;
21. Consider a project that costs $250 now and is expected to generate $98 in net revenues at the end of each of the next three years. If the MARR is 5%, the future worth of this project is __________. A. $18.24 B. $19.54 C. $22.33 D. $18.29 23. Machine X has an initial cost of $12,000 and annual maintenance of $700 per year. It has a useful life of four years and no salvage value at the end of that time. Machine Y costs $22,000 initially and has no maintenance costs during the first year. Maintenance is $200 at the end of the second year and increases by $200 per year thereafter. Machine Y has a useful life of eight years and an anticipated salvage value of $5,000 at the end of its useful life. If the MARR is 6%, what is the approximate Net Present Worth (NPW) of machine X? A. -$28,563 B. -$25,852 C. -$32,085 D. -$22,318
5. The Akana Company expects to sell 3,000 units, ± 15 percent, of a new product. The variable cost per unit is $8, ± 5 percent, and the annual fixed costs are $12,500, ± 5 percent. The annual depreciation expense is $4,000 and the sale price is $18 per unit, ± 2 percent. The project requires $24,000 of fixed assets which will be worthless when the project ends in six years. Also required is $6,500 of net working capital for the life of the project. The tax rate is 21 percent and the required rate of return is 12 percent. What is the net present value of the optimistic, best, and pessimistic cases using scenario analysis?
A 150.
pm.3
3. Your company has been presented with an opportunity to invest in a project. The facts on the project are presented below: The project is expected to operate as shown for ten years. If management expects to make 15% on its investments before taxes, would you recommend this project? Solve the Problem using Present Worth Method. * Investment Required Salvage Value after 10 Years Gross Income Annual Operating Costs: Php 50,000,000 Php 18,000,000 Labor Php 2,500,000 Php 1,000,000 Php 1,000,000 Php 500,000 Materials, Licenses, Insurance, etc* Fuel and Other Costs Maintenance Costs
what is the NPV of the new construction equipment? Initial cost = $100k, Salvage Value in 6 yrs = $25K, Increase Yearly Net Sales = $25k, Bank Rate = 10%
2. A construction company must replace a piece of heavy earth-moving equipment. Cat and Volvo are the two best alternatives. Both alternatives are expected to last 8 years. If the company has a minimum attractive rate of return (MARR) of 11%, which alternative should be chosen? Use IRR analysis. Cat Volvo First cost $15,000 $22,500 Annual operating cost Salvage value 3,000 1,500 2,000 4,000

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