A company puts P25 000.00 down and will pay P5000.00 every year for the life of a machine for 10 years. If the salvage value is zero and the interest rate is 10% compounded annually, what is the present value of the machine? (Ans.- P55 723.00)
A company puts P25 000.00 down and will pay P5000.00 every year for the life of a machine for 10 years. If the salvage value is zero and the interest rate is 10% compounded annually, what is the present value of the machine? (Ans.- P55 723.00)
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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Transcribed Image Text:04.
An investment of P135 000.00 is being considered for a new lathe machine.
Eslimated economic life of the lathe is 12 years with a salvage value of P10 000.00.
Projected annual income and expenses for the investment are P80 000.00 and P30
000.00, respectively. Using an MARR af 15% compounded annually and applying PW
analysis, determine if the lathe should be purchased.
(Ans. Purchase is justified, P137 900.00)
05. A mining company is offered a 9-year loase for a coal mine at a cost of P120M, The
engineers estimate the company will be able to mine 15 000 tons/yr for the first four
years and 22 500 tons/yr for the next five years. Operating costs is computed at
P1250/ton, while the price of coal is P275óton. If the company requires a 12%
minimum rate of return on its investment, determine if the offer should be considered.
Apply PW analysis.
(Ans. offor should be accepted, P25,68M)
06. J. Timberlake Corporation needs a special manufacturing machine for its production
plant. The company may purchase the machine for P500 000.00 and have it installed
at a cost of P50 000.00. The machine will incur an annual cost of P35 000.00 for
maintenance and repair, and is expected to be used for eight years and then sold for
P50 000.00. The company may also rent the machine at P115 000.00 per year
payable at the end of each year. If the machine is rented, costs of installation and
repair shall be shouldered by the lessor, however, a fee of P20 000.00 per vear
payable at the end of each year will be charged for basic maintenance, If the
company requires an 11% MARR on its investments, determine the better alternative
using PW analysis.
(Ans. It is advantageous to rent, - P694 726.57; – P708 417.97)
Transcribed Image Text:ME Board Exam October 1997
01.
A company puts P25 000.00 down and will pay P5000.00 every year for the life of a
machine for 10 years. If the salvage value is zero and the interest rate is 10%
compounded annually, what is the present value of the machine?
(Ans:- P55 723.00)
An electric generator is purchased for P80 000.00, it is expected to be used for five
yoars, and then sold for P15 000.00. Annual operating and maintenance costs are
estimated at P20 000.00. Using a discount rate of 10%, determine the present worth
of the investment.
02.
(Ans. - P146 502.00)
03. CE Board Exam November 1999
To maintain its newly acquired equipment, the company needs P40 000.00 per year
for the first five years and P60 000.00 per year for the next five years. In addition, an
amount of P140 000.00 would also be needed at the end of the fifth and the eighth
years. At 6% interest, what is the present worth of these costs?
(Ans. - P549 812.00)
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