A piece of equipment has a first cost of $165,000, a maximum useful life of 7 years, and a market (salvage) value described by therelation S = 120,000 – 23.000k, where k is the number of years since it was purchased, The salvage value cannot go below zero. TheAOC series is estimated using AOC = 60,000 + 12,000k. The interest rate is 13% per year. Determine the economic service life and therespective AW.The economic service life is4year(s) and the AW value is $ 100,000 a

The estimated span of time that an asset will be beneficial to the average owner is referred to as…

Answered: A piece of equipment has a first 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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Consider a machine purchased one year ago for $18,000. The machine is being depreciated $3,000 per year throughout a six-year period. Its current market value is $6,000, and the expected market value of the machine one year from now is $4,000. If the interest rate is 10%, the expected cost of holding the machine during the next year is $___.
Alternative R has a first cost of $85,000, annual M&O costs of $60,000, and a $20,000 salvage value after 5 years. Alternative S has a first cost of $175,000 and a $55,000 salvage value after 5 years, but its annual M&O costs are not known. Determine the M&O costs for alternative S that would yield a required incremental rate of return of 25.00% The M&O cost for alternative S is $
Calculate the present worth of all costs for a newly acquired machine with an initial cost of $24,000, no trade-in value, a life of 11 years, and an annual operating cost of $14,000 for the first 6 years, increasing by 10% per year thereafter. Use an interest rate of 10% per year. The present worth of all costs for a newly acquired machine is determined to be $
Project XYZ has a first cost of $75,000, operating and maintenance costs of $10,000 during each year of its 10 years life, and a $15,000 salvage value. What is its equivalent uniform annual cost (EUAC) if the interest rate is 10%/year? Most nearly number for answer. O No correct answer 21546 O 21262 21622 26223 22126
Compare the alternatives C and D on the basis of a present worth analysis using an interest rate of 10% per year and a study period of 10 years. Alternative C First Cost $-40,000 $-11,000 $-24,000 AOC, per Year Annual Increase in Operating Cost, per Year Salvage Value Life, Years $-2,000 $-200 $-500 $6,000 $200 10 The present worth of alternative C is $ and that of alternative D is $ (Click to select) voffers the lower present worth.
An elective project is currently under review. It requires an initial investment of $116,000 for equipment. The profit is expected to be $28,000 each year, over the 6-year project period. The salvage value of the equipment at the end of the project period is projected to be $22,000. Assume a MARR of 10%. Find an IRR for this project.
The maintenance cost for an investment is $2000 per year for the first 10 years and $1000 per year, for the 10 years past the initial maintenance period. The salvage value of the investment is $15,000. Draw the cash flow and calculate the present value of costs and benefits if the rate of return is 5%.
Compare the alternatives C and D on the basis of a present worth analysis using an interest rate of 15% per year and a study period of 10 years. Alternative C First Cost AOC, per Year Annual Increase in Operating Cost, per Year Salvage Value Life, Years $-50,000 $-9,000 $-28,000 $-5,000 $-700 $-900 $6,000 $700 10 The present worth of alternative C is $ and that of alternative D is $ Alternative D offers the lower present worth.
Two mutually exclusive alternatives have the estimates shown below. Use annual worth analysis to determine which should be selected at an interest rate of 10% per year. Q $-44,000 R $-84,000 First Cost AOC per Year Salvage Value $-10,000 $-5,000 in year 1, increasing by $1,000 per year thereafter $4,000 $5,000 Life 2 years 4 years Alternative (Click to select) should be selected.
Project A requires a $315,000 initial investment for new machinery with a five-year life and a salvage value of $35,500. Project A is expected to yield annual income of $23,900 per year and net cash flow of $78,750 per year for the next five years.Compute Project A’s accounting rate of return. *please help correct the answer
If produced by Plan A, a producer’s initial capital cost will be $120,000, its annual operating cost will be $30,000, and its salvage value after 4 years will be 20,000. With Plan B, there is a first cost of $240,000, an annual operating cost of $10,000, and $40,000 salvage value after 4-year life. Based on a present worth analysis at 15% interest rate, which plan should be chosen?
A project with a life of 10 has an initial fixed asset investment of $25,620, an initial NWC investment of $2,440, and an annual OCF of −$39,040. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required return is 10 percent, what is the project's equivalent annual cost, or EAC? Show equations using excel.

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