A company has just spent $189,000 in purchase of new equipment for its production business. This equipment is expected to generate an additional $55,000 in annual profit in the first year. The annual profit is projected to increase by 6% each subsequent year up to 10 years, the service life of the equipment. Calculate the present worth of this investment if the profits can earn an interest rate of 10% per year. OA. $427,457 OB. $220,734 OC. $914,980 OD. $236,632 CHIE

A company has just spent $189,000 in purchase of new equipment for its production business. This equipment is expected to generate an additional $55,000 in annual profit in the first year. The annual profit is projected to increase by 6% each subsequent year up to 10 years, the service life of the equipment. Calculate the present worth of this investment if the profits can earn an interest rate of 10% per year. OA. $427,457 OB. $220,734 OC. $914,980 OD. $236,632 CHIE

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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A manufacturer of video games develops a new game over two years. This costs $850,000 per year with one payment made immediately and the other at the end of two years. When the game is released, it is expected to make $1.20 million per year for three years after that. What is the net present value (NPV) of this decision if the cost of capital is 10%? OA. $1,462,112 OB. $1,005,202 OC. $913,820 OD. $1,736,258
Spero Industries has purchased new equipment that will provide an annual cash savings of $6,300 over its projected life of seven years. If the new equipment yields an internal rate of return equal to 12 percent, what is the cost of the new equipment? $
What is the internal rate of return (IRR) on an industrial building investment originally purchased for $3,500,000, seven years ago which has an annual net income of $250,000 each year and can be sold now for $4,000,000?
please write out the explanation
The operating and maintenance expenses for a mining machine are expected to be $11000 in the first year and increase by $700 per year during the 25-year life of the machine. What uniform series of payments would cover these expenses over the life of the machine? Interest is 10%/year compounded annually. $4
4. Calculate the present worth of a machine which costs $ 95000 initially and will have a $ 18000 salvage value after 11 years . The operating cost is $ 9000 at the end of yearl and amounts increasing by 10 % each year . Use an interest rate of 16 % per year compounded quarterly .
Problem 1: An investment in some rental property in Jubail is worth $12,000 with 10% residual value at the end of 10 years. Based on the data gathered relating to this investment (refer to the table below), the rental revenue will increase each year, but so will the maintenance expenses. If your MARR=12% per year and expect to recover the initial cost in not more than 3 years with an annual profit of not less than $900, do you accept or reject this investment opportunity? Justify your decision. Year Revenue 6,000 6,200 6,300 6,400 6,500 6,600 6,700 6,800 6,900 8,200 Expenses 12,000 3,100 3,300 3,500 3,700 3,900 6,100 4,300 4,500 4,700 4,900 1 2 3 4 5 6. 7 8 9. 10
14.
Accounting The SWEET Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $200,000. The equipment will have an initial cost of $900,000 and have a 6-year life. The salvage value is $60,000 at the end of the sixth year. If the hurdle rate is 12%, the internal rate of return is ____ %. (express your final answer in basis points, i.e., 13.14%)
A construction company plans to open an account for a major future equipment purchase. The plan is to make uniform annual deposits for the next 20 years in the account which is expected to earn a nominal interest rate of 6% per year compounded monthly. If the target is to have $4,000,000 at the end of the 20 years, how much should each deposit be? OA. $348,800 OB. $108,800 OC. $353,600 OD. $106,800
Subject : Accounting

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