A delivery car had a first cost of $40,000, an annual operating cost of $18,000, and an estimated $3500salvage value after its 6-year life. Due to an economic slowdown, the car will be retained for only 3 yearsand must be sold now as a used vehicle. At an interest rate of 11% per year, what must the market valueof the used vehicle be in order for its AW value to be the same as the AW if it had been kept for its full lifecycle? The market value of the used vehicle is determined to be $

Annual worth consists of the annual operating cost and equivalent annual cost of first cost with…

Answered: A delivery car had a first cost of…

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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The management of Kunkel Company is considering the purchase of a $41,000 machine that would reduce operating costs by $9,000 per year. At the end of the machine’s five-year useful life, it will have zero salvage value. The company’s required rate of return is 12%. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table. Required: 1. Determine the net present value of the investment in the machine. 2. What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine?
The management of Kunkel Company is considering the purchase of a $40,000 machine that would reduce operating costs by S9, 500 per year. At the end of the machine's five-year useful life, it will have zero salvage value. The company's required rate of return is 13%. Click here to view Exhibit 148-1 and Exhibit 148 -2, to determine the appropriate discount factor(s) using table. Required: 1. Determine the net present value of the investment in the machine. 2. What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine?
A production machine costs $40,000 and has a 7-year useful life. At the end of 7 years, it can be sold for $10,000. (a) If interest is 10% compounded quarterly, what is the equivalent annual cost of ownership of this machine over its useful life? (b) The company that buys the 7-year old machine uses it for an additional 5 years and then wants to responsibly dispose of it. What green options does the company have? Research and report to the firm on what happens to most industrial machinery after its useful life.
A delivery car had a first cost of $40,000, an annual operating cost of $15,000, and an estimated $4500 salvage value after its 6-year life. Due to an economic slowdown, the car will be retained for only 2 years and must be sold now as a used vehicle. At an interest rate of 10% per year, what must the market value of the used vehicle be in order for its AW value to be the same as the AW if it had been kept for its full life cycle?
A delivery car had a first cost of $24,000, an annual operating cost of $15,000, and an estimated $6500 salvage value after its 6-year life. Due to an economic slowdown, the car will be retained for only 4 years and must be sold now as a used vehicle. At an interest rate of 15% per year, what must the market value of the used vehicle be in order for its AW value to be the same as the AW if it had been kept for its full life cycle? The market value of the used vehicle is determined to be $
Coronado, Inc. is considering purchasing equipment costing $39000 with a 7-year useful life. The equipment will provide cost savings of $9000 and will be depreciated straight-line over its useful life with no salvage value. Coronado Inc. requires a 11% rate of return. What is the approximate net present value of this investment? Period 7 O $30000 O $4812 O $3408 O $2076 9% 5.033 Present Value of an Annuity of 1 10% 4.868 11% 4.712 12% 4.564 13% 4.423 16% 4.039
iSooky has a spotter truck with a book value of $59,000 and a remaining useful life of 5 years. At the end of the five years the spotter truck will have a zero salvage value. The market value of the spotter truck is currently $41,500. iSooky can purchase a new spotter truck for $139,000 and receive $32,900 in return for trading in its old spotter truck. The new spotter truck will reduce variable manufacturing costs by $26,900 per year over the five- year life of the new spotter truck. The total increase or decrease in income by replacing the current spotter truck with the new truck (ignoring the time value of money) is: Multiple Choice $28,400 decrease $32,900 decrease $139,000 decrease $32.900 increase $28,400 increase
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Baird Rentals can purchase a van that costs $110,000; it has an expected useful life of five years and no salvage value. Baird uses straight-line depreciation. Expected revenue is $40,425 per year. Assume that depreciation is the only expense associated with this Investment. Required a. Determine the payback period. Note: Round your answer to 1 decimal place. b. Determine the unadjusted rate of return based on the average cost of the investment. Note: Round your answer to 1 decimal place. (l.e., .234 should be entered as 23.4). a. Payback period b. Unadjusted rate of return years %

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