A company just purchased a new vehicle for $25,000. The vehicle's salvage value at EOY1 is 80% ofthe initial cost and decreases by 20% every year afterwards. The O&M cost in Year 1 is zero, but is$950 in Year 2 and increases by $950 annually. The company's MARR is 10%. The economic life ofthe vehicle isyears.O A.6OB.5OC.7OD.85O E. 3OF. 4

Economic Life: It is the timeframe a resource is supposed to be valuable to the owner.

Answered: A company just purchased a new vehicle…

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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P is present value S is salvage value
One year ago, your company purchased a machine used in manufacturing for $105,000. You have learned that a new machine is available that offers many advantages and you can purchase it for $140,000 today. It will be depreciated on a straight-line basis over 10 years and has no salvage value. You expect that the new machine will produce a gross margin (revenues minus operating expenses other than depreciation) of $55,000 per year for the next 10 years. The current machine is expected to produce a gross margin of $22,000 per year. The current machine is being depreciated on a straight-line basis over a useful life of 11 years, and has no salvage value, so depreciation expense for the current machine is $9,545 per year. The market value today of the current machine is $65,000. Your company's tax rate is 38%, and the opportunity cost of capital for this type of equipment is 10%. Should your company replace its year-old machine? The NPV of replacing the year-old machine is $ (Round to the…
Suppose a new car is purchased for $41,357 and depreciates by 21% over the first year of ownership. Find the depreciation of the car over the first year. $… If the car is driven 12,870 miles in that year, what is the cost, in dollars per 100 miles driven, for depreciation? (Round your answer to the nearest cent.) …? Dollars per 100 miles
One year ago, your company purchased a machine used in manufacturing for $105,000. You have learned that a new machine is available that offers many advantages and you can purchase it for $160,000 today. It will be depreciated on a straight-line basis over 10 years and has no salvage value. You expect that the new machine will produce a gross margin (revenues minus operating expenses other than depreciation) of $40,000 per year for the next 10 years. The current machine is expected to produce a gross margin of $24,000 per year. The current machine is being depreciated on a straight-line basis over a useful life of 11 years, and has no salvage value, so depreciation expense for the current machine is $9,545 per year. The market value today of the current machine is $45,000. Your company's tax rate is 38%, and the opportunity cost of capital for this type of equipment is 12%. Should your company replace its year-old machine? The NPV of replacing the year-old machine is $. (Round to the…
(a) A company is now considering to replace an old machine. The old machine was purchased at $600,000 four years ago and it is expected to work productively for six more years. The current market value of the old machine is $300,000 and it will depreciate $40,000 per year. The annual operating and maintenance expense for the old machine is S200,000 this year and will increase $60,000 per year thereafter. The new machine can be purchased at the cost of $800,000. The market value of the new machine will be $500,000 at the end of first year of ownership and will depreciate $50,000 per year thereafter. The expected annual operating and maintenance costs will be $100,000 for the first year and will increase $40,000 per year thereafter. Assume that 10% MARR per year is used for the entire replacement analysis. (ii) Determine the most economical period to keep the old (defender) machine before replacing by the new (challenger) machine.
What is the FW?PW?AW?
None
Q3: The following table gives the operation cost, maintenance cost and salvage value at the end of every year of a machine whose purchase value is 25,000$. Find the economic life of the machine assuming interest rate, i = 15%. End of Year (n) 1 2 3 4 5 6 7 8 9 10 Cost operation at the end of year ($) 3000 4000 5000 6000 7000 8000 9000 10000 11000 12000 Maintenance cost at the end of year ($) 300 400 500 600 700 800 900 1000 1100 1200 Salvage value ate end of the year ($) 9000 8000 7000 6000 5000 4000 3000 2000 1000 500
answer in 30 minutes.
One year ago, your company purchased a machine used in manufacturing for $107,800. You have learned that a new machine is available that offers many advantages and you can purchase it for $170,000 today. It will be depreciated on a straight-line basis over 10 years and has no salvage value. You expect that the new machine will produce a gross margin (revenues minus operating expenses other than depreciation) of $35,000 per year for the next 10 years. The current machine is expected to produce a gross margin of $22,000 per year. The current machine is being depreciated on a straight-line basis over a useful life of 11 years, and has no salvage value, so depreciation expense for the current machine is $9,800 per year. The market value today of the current machine is $60,000. Your company's tax rate is 30%, and the opportunity cost of capital for this type of equipment is 11%. Should your company replace its year-old machine? The NPV of replacing the year-old machine is $ (Round to the…
Value-Chains makes keychains out of gold. Each keychain can be sold for $100. The materials cost is $40.The Öxed costs incurred each year for factory and administrative expenses are $200,000. The machinerycosts $1 million and is depreciated straight-line over 10 years to a salvage value of zero.1. What is the accounting break-even level of annual sales in terms of number of keychains sold?2. What is the NPV break-even level of sales assuming a tax rate of 35%, a 10-year project life, and adiscount rate of 12%?3. Elaborate on your observations and decisions.
A chip manufacturer makes video gaming chip that can be sold for $50. The chip material cost is $15 for each chip. The operations costs of the chip manufacturer (administration etc.) is $100000. The chip manufacturing machinery costs $500000 that is depreciated over 10 years to a salvage value of zero. a) What is the accounting breakeven level of sales in terms of number of chips sold? b) b. What is the NPV breakeven level of sales assuming a tax rate of 35%, 10-year project life and a discount rate of 12%.

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