A 50-passenger bus can be purchased for $95,000. An annual net profit of $400 per passenger is anticipated. The salvage value of the bus is a estimated to be $8000 after a 10 year life. At 7.5% annual compound interest, what is the expected payout after 10 years?

A 50-passenger bus can be purchased for $95,000. An annual net profit of $400 per passenger is anticipated. The salvage value of the bus is a estimated to be $8000 after a 10 year life. At 7.5% annual compound interest, what is the expected payout after 10 years?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: Culver Company is considering investing in new equipment that will cost $1428000 with a 10 year…

A: Payback period The method used in capital budgeting to help investors understand the approximate…

Q: A project has a $53000 first cost that returns $5000 per year over its 15 year life. It has a $12000…

A: The payback period, a monetary metric, estimates how long it will take an investment to recover its…

Q: A new grocery store cost $50 million in initial investment. It is estimated that the store will…

A: Net present value (NPV) is the difference between the current value of cash and the future worth of…

Q: You buy a new piece of equipment for $11,778, and receive a cash inflow of $2,000 per year for 10…

A: Initial Investment is $11,778 Cash Inflow per year = $2,000 Time Period = 10 Years

Q: Kermit is considering purchasing a new computer system. The purchase price is $132,738. Kermit will…

A: The present worth of an investment or money is computed using the present value concept of the time…

Q: What is the annual operation and maintenance costs of owning this vehicle?

A: Time value of money (TVM) is used to measure the value of money at different point of time in the…

Q: You are planning on replacing a delivery vehicle in 5 years. You believe at the end of 5 years you…

A: Given: Salvage value = $8,000 Interest rate = 11% Years =5

Q: DON Corporation is contemplating the purchase of a machine that will produce net after tax cash…

A: The present value indicate the current value of money to be received or paid in the future. It helps…

Q: EXAMPLE: A new machine will be purchased for 150000 TL and sold for 30000 TL at the end of 5 years.…

A: In business or financial contexts, cash flow is defined as the difference between total cash inflows…

Q: Suppose you want to purchase equipment costing $500 and which will give you a cash flow of $35 every…

A: Net present value is the capital budgeting technique used to evaluate the profitability of various…

Q: is estimated that a certain piece of equipment can save$19,000per year in labor and materials…

A: Above question can be solve with help of present value of ordinary annuity formula Formula PV = P…

Q: NPV

A: Formula to calculate the NPV is: NPV = Cash flows/(1+i)^n - Initial investment

Q: Michael Scott Paper, Inc. is considering a new machine that requires an initial investment of $…

A: NPV or net present value It may be defined as the present value of the future cash flows that may…

Q: Bill plans to open a service center. The equipment will cost $50,000. Bill expects the after-tax…

A: Profitability index (PI) is the ratio of the present value of the cash inflows from the investment…

Q: The required investment cost of a new, large shopping center is $47 million. The salvage value of…

A: NPV means Net Present value.It is computed by deducting initial investment from present value of…

Q: Michael Scott Paper, Inc. is considering a new machine that requires an initial investment of $650,…

A: Net Present Value (NPV) is a financial metric that helps assess the profitability of an investment…

Q: Considering an interest rate of 8%, that the cost of the equipment is $300,000 and you will replace…

A: Where the actual cost of equipment is dividing over the life of equipment is called annual cost.…

Q: Emerald Enterprises is developing a new product at the cost of $ 50,000. The new product is expected…

A: The term "payback period" refers to the number of years needed to recoup the initial monetary…

Q: New equipment costs $847,000 and is expected to last for five years with the salvage value of 10% of…

A: The formula for the calculation of PVCCATS is as follows: PVCCATS=CdTd+k×1+0.5k1+k-SdTd+k×11+kn C is…

Question

A 50-passenger bus can be purchased for
$95,000. An annual net profit of $400 per
passenger is anticipated. The salvage value of
the bus is a estimated to be $8000 after a 10
year life. At 7.5% annual compound interest,
what is the expected payout after 10 years?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

RadCo is considering two projects. The first, project A. has $400,000 income after the first year which increases by 8% each year for a total of 5 years. Project B has $450,000 income after the first year which increases by $25,000 each year for a total of 5 years. RadCo can only choose one project. Based on present worth today, which project should RadCo choose? The interest rate is 6% annual compounded annually.
A wind turbine will cost $2 million to build and install. The PVCCATS works out to 25% of the investment. The turbine will operate for 20 years and produce sales of $300,000 at the end of each year. The operating margin (EBIT margin) is 80% and the tax rate is 25 %. There are no changes to net working capital and no salvage. The discount rate is 8% What is the present value of the operating cash flow annuity? (closest answer) $1.6 million $1.8 million $2.0 million 2.2million
Account
A business is considering purchasing a piece of new equipment for $200,000. The equipment will generate the following revenues: Year 1: $50,000Year 2: $50,000Year 3: $50,000Year 4: $60,000The machine can be sold at the end of the year four for $25,000. Assume a discount of 8%. 2. What is the compounded return(IRR) for this project?
It will cost $9729 to acquire an ice cream cart that is expected to produce cash inflows of $3830 a year for five years. After the five years, the cart is expected to be worthless. What is the payback period?
Kermit is considering purchasing a new computer system. The purchase price is $131,870. Kermit will borrow one-fourth of the purchase price from a bank at 10 percent per year compounded annually. The loan is to be repaid using equal annual payments over a 3-year period. The computer system is expected to last 5 years and has a salvage value of $7,452 at that time. Over the 5-year period, Kermit expects to pay a technician $20,000 per year to maintain the system but will save $78,952 per year through increased efficiencies. Kermit uses a MARR of 12 percent to evaluate investments. What is the net present worth for this new computer system? Enter your answer in this format: 12345
Courses/88945/quizzes/289708/take Van Nuys Company Year Cash Flow Cost of Capital 12% %24 (7,370) 24 1 4,000 (2,000) 24 24 4,000 (2,000) 24 4,000 24 (2,000) $4 4,000 24 (2,000) 5 $4 4,000 (2,000) 24 24 6. 4,000 24 (2,000)
A company is planning to buy a new truck that will cost P700,000 and will be depreciated on a straight-line basis over 5-year period. The new truck will replace another that has a book value of P450,000 and five years useful life remaining. The old truck can be sold for P400,000. The current tax rate is 35%. How much is the net initial investment for the new truck?