A machine was purchased 4 years ago. Its current market value is $14,000. Estimated future market values and annual operating costs for the next 5 years are given in the following table. What is the Economic service life of the machine if a 12% per year return is required? YearMarket Value,$Annual Operating cost,$ 10084 8084 3 2684 2700 3000 3500 4900 6000 4 2000

A machine was purchased 4 years ago. Its current market value is $14,000. Estimated future market values and annual operating costs for the next 5 years are given in the following table. What is the Economic service life of the machine if a 12% per year return is required? YearMarket Value,$Annual Operating cost,$ 10084 8084 3 2684 2700 3000 3500 4900 6000 4 2000

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 River Corporation is considering the purchase of a new machine costing $380,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Year 1 2 O 10.5% O 5.5% O 25.5% Operating O 15.5% Income $20,000 20,000 20,000 20,000 20,000 Net Cash Flow $95,000 95,000 The average rate of return (rounded to one decimal place) for this investment is 95,000 95,000 95,000
A manufacturing plant manager has purchased a new bologna slicing machine for $24,500. The new machine is expected to produce an extra $8,000 of revenue and have an annual operating expense of $3,000. If the useful life is expected at 6 years and i = 7% per year, what is the PW? Select one: a. $50000 b. $23835 36 c. $35000 d. $ 25000
Consider a piece of industrial equipment that has an installed cost of $ 100,000. The equipment is expected to generate $30,000 worth of annual energy saving during its 1st year of installation. The value of these annual savings is expected to increased at the rate at 5% per year because of increased fuel costs. Assumes that the equipment has a service life of 5 years ( or 3000 operating hrs per year) with no appreciable salvage value. Determine the equivalent and savings per each operating hours at i=14%.
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A company plans to purchase a new machine due to the expected demand for anew product. The machine costs Ghc185,000 and it is expected that the machineshall be used for five (5) years with a scrap value of Ghc15,000. The companyexpects the demand for the product to be as follows: Year 1 2 3 4 5 Demand (Units) 25,000 30,000 35,000 40,000 20,000 Increase Selling Price 2% per year Variable Cost of production Fixed production expenses 3% per year5% per year The company’s cost of capital is 10% and pays corporate tax at a rate of 25% inthe related year. Calculate the Net Present Value (NPV) of purchasing the newmachine advice whether it makes economic sense to buy the new machine.
Lesego Ltd is considering an investment in a new machine for the production of a new product, X. There are two possibilities, Machine A and Machine B. Both product X and the machine would have an expected life of five years.The following information is available:Product X Selling price $50Variable cost 32Increase in fixed overhead (excluding depreciation of the new machine) is $90,000 per year.YearSales units 1 10,0002 15,0003 20,0004 20,0005 5,000 Machine A Machine BInitial cost ($000) 550 480Residual value 50 30The company’s cost of capital is 10%,Required:Evaluate each machine, using the following methods:Accounting rate of return Payback;Net present value. Discuss the importance of capital budgeting in organisations.
A commercial 3D printer is purchased for $350,000. The salvage value of the printer decreases by 30% each year that it is held. The cost to operate and maintain the machine the first year it is used is $14,000; these costs increase by $5,000 each year. What is the optimal replacement interval and minimum EUAC for the printer, assuming a MARR of 13% is used? Click here to access the TVM Factor Table Calculator. years ORI: EUAC*: $ Carry all interim calculations to 5 decimal places and then round your final answers to a whole number. The tolerance is ±5 for the EUAC*.
A company plans to spend $ 154810 to install a new machine. Annual maintenance cost is $ 12581. Estimated annual income is $ 33132 starting in the first year. This revenue begin increasing by $ 1063 per year at the end of 2d year and continue increasing through the end of 15 years. The market value of the machine is $22137 at the end of study period of 15 years. Determine the annual worth if the minimum attractive rate of return is 9% per year. Answer:
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