9. Two machinery alternatives are described below. Complete the table below, assuming an interest rate of 6% and a useful lifetime of 8 years. Alt. 1: The initial purchase price of the machine is $25,000. The salvage value at the end of the useful life will be $5000. Maintenance costs are $2000 for the first' year and remains same for the rest of the life. Alt.2 2: The machine is leased for an initial payment of $2000 plus annual payments of $3500. There is no salvage value. A maintenance contract is purchased for a single payment of $10,000 at the start of the lease period. It 2 PWB PWC NPW State selection criteria and make decision on what alt. to select?

9. Two machinery alternatives are described below. Complete the table below, assuming an interest rate of 6% and a useful lifetime of 8 years. Alt. 1: The initial purchase price of the machine is $25,000. The salvage value at the end of the useful life will be $5000. Maintenance costs are $2000 for the first' year and remains same for the rest of the life. Alt.2 2: The machine is leased for an initial payment of $2000 plus annual payments of $3500. There is no salvage value. A maintenance contract is purchased for a single payment of $10,000 at the start of the lease period. It 2 PWB PWC NPW State selection criteria and make decision on what alt. to select?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Give answer with explanation and provide correct and incorrect option explanation
expense of $500. Consider a yearly Two machines are evaluated for a new project, consider a yearly interest rate of 6% and the information described in the following table. Determine EUAC for both alternatives and determine the best option. Purchase cost Salvage value Duration Machine A Machine B $10,000 $15,000 $1,250 $1,950 5 years 10 years 11 13 L
With the estimates shown below, Sarah needs to determine the trade-in (replacement) value of machine X that will render its AW equal to that of machine Y at an interest rate of 8% per year. Determine the replacement value. Machine X Machine Y 90,000 Market Value, S -40,000 for year 1,increasing by 2000 per year thereafter. 24,000 Annual Cost, $ per Year -59,500 Salvage Value Life, Years 19,500 The replacement value is $
T1).
The AW values for retaining a presently owned machine for additional years are shown in the table. Note that the values represent the AW amount for each of the n years that the asset is kept, i.e., if it is kept 5 more years, the annual worth is $−95,000 for each of the 5 years. Assume that future costs remain as estimated for the replacement study and that used machines like the one presently owned will always be available. (a) What is the ESL and associated AW of the defender at a MARR of 12% per year? (b) A challenger with an ESL of 7 years and an AWC = $-88,000 per year has been identified. Which AW will be less for the respective ESL periods? Retention Period, Years AW Value, $ per Year 1 -87,000 2 -93,000 3 -85,000 4 -83,000 5 -95,000 a) The ESL of the defender is_____ year(s) with the lowest AW of $_________ . b) The______________ has the lower AW at _________$ for n equal to ______ .
Consider the following alternatives below.Based on a 7% interest rate, assuming both alternatives perform the same task and there is a continuing requirement, which alternative should be selected and what is its equivalent uniform annual cost?