A farm must decide whether or not to purchase anew tractor.The tractor will reduc costs by $2,000 in the first year,$2,500 in the second and $3,000 in the third and final year of usefulness.The tractor costs $9,000 today,while the above cost savings will be relized at the end of each year. if the interest rate is 7%. what is the net present value of purchasing the tractor?

Q: It’s time to get a new laptop that is $2500. If you save up for it each month it will take one year…

A: Given information: Purchase price = $2,500 i.e. the amount which is required at the end of one year…

Q: You buy a house that costs $10,000. Its annual maintenance cost = $100/year. After 5 years, you can…

A: Given: Initial cost = $10,000 Maintenance cost = $100 Years = 5 Year 5 sale value = $20,000

Q: If a garden center is considering the purchase of a new tractor with an initial investment cost of…

A: A payback period seems to be the amount of time a company anticipates it will take to recoup its…

Q: Suppose that the firm Cherry Blossom has an orchard they are willing to sell today. The net annual…

A: This question is based on the concept of fair value asset pricing which says that the fair market…

Q: Calculate the Net Present Value (or cost) of an e-car over a period of 15 years.

A: Net Present value is used to calculate the current total value of a future stream of payments.

Q: One year ago, the Jenkins Family Fun Center deposited $3,400 into an investment account for the…

A: A = P (1+i)twhere,P = Principal investedi = Interest Ratet = TimeFor, investment of $3,400 made an…

Q: ans are available for a company to obtain automobiles for its salesmen. Use an interest rate of 10%.…

A: In this we need to calculate the present value of both option and select the best.

Q: Assume you are preparing to move into a new neighborhood. You are considering renting or buying.…

A: 1. Total amount of rent for next 15 year can be computed shown as below: Therefore, Present Value…

Q: Specifically, calculate the present value of future rents. Use a discount rate of 5%. 1. A parcel of…

A: The question is based on the concept of present value calculation of perpetual cash flow with…

Q: A small business has determined that the machinery they currently use will wear out in 18 years. To…

A: The life of the machine is 18 years.The rate of interest is 1.5% per quarter.the cost of the…

Q: To finance the purchase of a new factory recently, you’ve arranged for a 40-year mortgage loan for…

A: Annual percentage rate (APR) refers to the annual cost of funds borrowed. The APR is usually…

Q: This question has multiple parts. A farmer sows a certain crop. It costs $220,000 to buy the seed,…

A: NPV refers to the present value of all future cash flows less initial investment for the life of the…

Q: One year ago, the Jenkins Family Fun Center deposited $4,400 into an investment account for the…

A: Future value of amount includes the amount being deposited and interest amount account accumulated…

Q: If a garden center is considering the purchase of a new tractor with an initial investment cost of…

A: Payback period is defined as time taken to recover original investment. Hence if payback period is…

Q: You're thinking of buying a car to travel around in, rather than paying $2,788 at the end of every…

A: We first need to determine the NPV of the cost of owning the car for 14 years. Once we have…

Q: You are going to buy a new rooftop tent for your SUV/Truck. You can either pay $2,100 today for the…

A: We have to calculate present value of both option to compare which option is preferable.

Q: Your company is trying to decide whether it should purchase a copier from Xerox or lease it. The…

A: Here,Purchase Cost is $145,000Annual Service Charge is $8,000Annual Lease Payments is…

Q: (a) If you build the condominium units today, how many condominium units will you build? What is the…

A: Investment decisions refer to the process of evaluating and selecting capital allocation…

Q: Cooley Landscaping needs to borrow $25000 for a new front-end dirt loader. The bank is willing to…

A: For Annual Payments,Rate of interestAnnual (r) = 8% or 0.08Number of Period  = 6  = $5407.88(Using a…

Q: Using a discounted present value model of house prices, is it worth carrying out a renovation…

A: Working notes :-                            Initital cash outlay…

Q: You found your dream home! The down payment is $29,000. However, you still need 40% of the down…

A: Computation:

Q: Scenario: You purchase... 10 acres of bare ground in an area zoned commercial/office. Streets and…

A: Here, Size of land is 10 acres Price paid per square feet is $6 Holding Period is 5 years

Q: Based on the information below, if Jason starts saving immediately for the down payment on his…

A: The FV of an investment refers to the cumulative value of its cash flows at a future date assuming…

Q: Your company wants to purchase a photostat machine which costs RM15,000. It will be obsolete in 5…

A: A company considering the purchase of an asset, whose ownership is just incidental to using the…

Q: How to compute Equivalent Annual Annuity on financial calculator: The old combine is good for 2…

A: Equivalent annual annuity (EAA) is an approach which is used to select best alternative between two…

Q: you are buying new television. from past experience you estimate future repair cost as P500 during…

A: Capital Budgeting is the process of assessing long-term decisions made by management in order to…

Q: Your landscaping company can lease a truck for $8,150.00 a year for 4 years. It can instead buy the…

A: The Present Value of Ordinary Annuity refers to the concept which gives out the discounted or…

Q: An investor is purchasing an industrial building.He needs to replace the roof today at a cost of…

A: Future value is the value of an investment or asset at a specified date in the future, based on the…

Q: Your rental company wants to purchase a new car for its car rental business. The car costs $20,000.…

A: Lease - A lease is an option that allows using the asset immediately without any down payment. The…

Q: You want to build a house in 12 years. You estimate that the total cost will be $350,000. If you can…

A: The required rate of return is the rate at which the investment should grow to meet the desired…

Q: Jasmine Manufacturing is considering a project that will require an initial investment of $51,900…

A: Year Cash flow 0 -51900 1 9700 2 9700 3 9700 4 8400 5 8400 6 1500 7 1500 8 1500…

Q: You are thinking of renovating a basement apartment beneath your house, which you currently rent out…

A: Incremental rent per month due to reinovation = C = $ 729 - $ 521 = $ 208Payment frequency =…

Q: college can purchase a telephone system for $35000 or lease a system for 5 years for a front-end…

A: Present value analysis is a technique for evaluating capital budgeting decisions. A company should…

Q: Use Annual Worth method to calculate the benefit/cost ratio at i = 6% for a new library. The first…

A: Annual worth: It is the annual value of those cash flows that are expected to happen in the future.

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.