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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Machine A was purchased three years ago for $10,000 and had an estimated market value of $1,000 at the end of its 10-year life. Annual operating costs are $1,000. The machine will perform satisfactorily for the next 7 years. A salesperson for another company is offering machine B for $12,000 with a market value of $5,000 after 7 years. Annual operating costs will be $600. Machine A could be sold now for $7,000 and MARR is 12% per year.Should you buy the new machine? Use Annual Worth method. Write a briefinterpretation of your answer.
You purchased an industrial oven five years ago for $80,000. O&M costs were $20,000 for this year but are expected to increase by $750 each year for the next five years. The current salvage value of the oven is $40,000 but expected to decrease by 10% in each of the following years of use (e.g. $36,000 after one year, $32,400 after two years, so on). At i = 10%, find the remaining economic life for this asset. A) 1 years B) 2 years C) 3 years D) Answers A, B and C are not correct
E1
A company with a MARR of 10% must install one of two production machines. The economic parameters of each machine are as follows: Machine Initial cost (5) Service life (years) Salvage value end of life (S) $15,000 4 years $22,000 6 years 52,000 $1,000 The Future worth (FW) for the machine Y over the 12 years analysis period is:
A large standby electricity generator in a hospital operating room has a first cost of $67,250 and may be used for a maximum of 6 years. Its salvage value, which decreases by 15% per year, is described by the equation S = 67,250(1 − 0.15)n, where n is the number of years after purchase. The operating cost of the generator will be constant at $9,000 per year, and the interest rate is 12% per year. Determine the economic service life and associated AW values. The economic service life is 6 years and the AW value is $−__.
K Company has purchased a new machine costing $27,000 and the machine is expected to reduce the operating expenses by $7,000 every year. The useful life of machine is 5 years and the machine is expected to have a zero-scrap! value at the end of its useful life. The company's required rate of return is 12%. Calculate the Net Present Value (NPV) of the machine. (Round intermediate calculations to 3 decimal places and final answer to the nearest dollar.)
To maintain a machine the company has to pay 3500$ annually for the 8 years, if the rate of interest is 9% what will be the present worth? Select one: a. 18840$ b. 19843$ c. 19372$
A 1-year-old defender has a current market value of $ 5,000. Its operating and maintenance expenses for next year are $ 2,000 and are expected to grow 1,500 each year. This year repairs were made for $ 1,200. Its market value is expected to decline 25% each year. The machine can continue to be used for 2 more years. There is a challenger that costs $ 10,000 and has operating and maintenance expenses of $ 2,200 per year. The machine will only be used for 3 years and the salvage value will be 6,000 after one year and will decrease 15% annually after that. The MARR demanded by investors is 12% 1. Calculate the Equivalent Annual Cost of the two options that the company has 2. Which is the best strategy? (Can help me doing it in excel please)
You are equipping an office. The total office equipment will have a first cost of2.0Mand a sal-vage value of$200,000. You expect the equipment will last 10 years. Use a spreadsheet to compute the40%bonus depreciation with MACRS depreciation schedule.
A company must purchase a new machine to increase production. The machine will cost $50,000 to purchase. The following are the remaining cash flows of the machine and its probabilities. The machine is supposed to be used for 6 years and the MARR is 10%. Annual Cost Annual Revenue Calculate the Present Worth. Probability .2 .6 .2 .6 .4 Outcome $3,000 $4,500 $5,500 $35,000 $40,000
A three-year-old small crane is being considered for early replacement. Its current market value is $17,500. Estimated future market values and annual operating costs for the next five years are given in the table below. What is the economic life for this crane if the interest rate is 5.1% per year? Year 0 Market Value Annual Operating Cost $17,500 1 $15,110 $4,700 2 $12,930 $4,809 3 $10,110 $4,883 4 $7,400 $4,997 5 $- $5,095
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

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