a) Laser beams are being used in a large construction project to achieve the exact alignment of components. There are two types of laser systems for alignment steps for the project, photos are listed below. IC system $5,000 $1,000 $600 $180 UC system $3,200 $0 $950 $0 Initial cost Recovery value Annual cost of operation Additional taxes and insurance per year If both systems have a life of 4 years and the minimum rate of profit is 15%, which offers the lowest equivalent Annual Cost?

a) Laser beams are being used in a large construction project to achieve the exact alignment of components. There are two types of laser systems for alignment steps for the project, photos are listed below. IC system $5,000 $1,000 $600 $180 UC system $3,200 $0 $950 $0 Initial cost Recovery value Annual cost of operation Additional taxes and insurance per year If both systems have a life of 4 years and the minimum rate of profit is 15%, which offers the lowest equivalent Annual Cost?

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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Aria Acoustics, Incorporated (AAI), projects unit sales for a new 7-octave voice emulation implant as follows: Year Unit Sales 1 2 74,700 80,100 2345 5 85,800 83,000 69,900 Production of the implants will require $1,490,000 in net working capital to start and additional net working capital investments each year equal to 20 percent of the projected sales increase for the following year. Total fixed costs are $3,850,000 per year, variable production costs are $144 per unit, and the units are priced at $326 each. The equipment needed to begin production has an installed cost of $18,600,000. Because the implants are intended for professional singers, this equipment is considered industrial machinery and thus qualifies as 7-year MACRS property. In five years, this equipment can be sold for about 25 percent of its acquisition cost. The tax rate is 24 percent and the required return is 18 percent. (MACRS schedule) a. What is the NPV of the project? (Do not round intermediate calculations and…
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Aria Acoustics, Incorporated (AAI), projects unit sales for a new 7-octave voice emulation implant as follows: Year Unit Sales 1 74,400 2345 79,800 85,400 82,700 69,500 Production of the implants will require $1,480,000 in net working capital to start and additional net working capital investments each year equal to 15 percent of the projected sales increase for the following year. Total fixed costs are $3,800,000 per year, variable production costs are $143 per unit, and the units are priced at $325 each. The equipment needed to begin production has an installed cost of $18,500,000. Because the implants are intended for professional singers, this equipment is considered industrial machinery and thus qualifies as 7-year MACRS property. In five years, this equipment can be sold for about 20 percent of its acquisition cost. The tax rate is 23 percent and the required return is 17 percent. (MACRS schedule) a. What is the NPV of the project? (Do not round intermediate calculations and…
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The Retired Fund is an open-ended mutual fund composed of $500 million in U.S. bonds and U.S. Treasury bills. This fund has had a portfolio duration (including T-bills) of between 3 and 9 years. Retired has shown first-quartile performance over the past five years, as measured by an independent fixed-income measurement service. However, the directors of the fund would like to measure the market timing skill of the fund’s sole bond investor manager. An external consulting firm has suggested the following three methods:a. Method I examines the value of the bond portfolio at the beginning of every year, then calculates the return that would have been achieved had that same portfolio been held throughout the year. This return would then be compared with the return actually obtained by the fund.b. Method II calculates the average weighting of the portfolio in bonds and T-bills for each year. Instead of using the actual bond portfolio, the return on a long-bond market index and T-bill index…

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