A used truck is purchased for $10,000 and has market values of $7,500, $6,000 and $5,000 over its remaining 3 years of useful life. The operations and maintenance costs for the vehicle are $1,200 in year 1, $1,500 in year 2 and $2,000 in year 3. Using an interest rate of 10%, determine: a. the marginal costs b. when to replace the truck if a newer truck has a

A used truck is purchased for $10,000 and has market values of $7,500, $6,000 and $5,000 over its remaining 3 years of useful life. The operations and maintenance costs for the vehicle are $1,200 in year 1, $1,500 in year 2 and $2,000 in year 3. Using an interest rate of 10%, determine: a. the marginal costs b. when to replace the truck if a newer truck has a

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 18P: Filkins Fabric Company is considering the replacement of its old, fully depreciated knitting...

See similar textbooks

Similar questions

please reply asap
A Company is considering two alternatives with regards to an equipment which it needs. The alternatives are as follows: Alternative A; Purchase Cost of equipment Salvage value Daily operating cost Economic life, years P700,000 100,000 500 10 Alternative B: Rental at P1,500 per day At 18% interest, how many days per year must the equipment be in use if Alternative A is to be chosen.
Two types of power converters are under consideration for a specific application. An economic comparison is to be made using a MARR of 10% and the following cost estimates: Alternative Model A Model B Service Life (Years) 5 10 First Cost $10,000 $20,000 Salvage Value 0 5,000 Annual Operating Cost 2,500 1,200 Draw the Cash Fiow Diagram for each alfernative covering the entire analysis period. Compute the Net Present Worth for Model A? Compute the Net Equivalent Uniform Annual Worth for Model A? Which of these alternatives should be selected?
Company C is seeking for help to decide this option to choose to upgrade their current bottleneck equipment. There are two vendors and one rental option. The cost details are shown in the table below. Vender R 75000 28000 Option Initial Cost Annual Operation Cost Salvage Value 0 Estimated Life in Year 2 MARR = 10% per year compounded monthly. Vender T 125000 12000 30000 3 Rental 0 52000 0 Maximum 3 years 1. Select from the two sales vendors using the LCM and PW analysis. 2. Determine which of the three options is cheaper over a 3 year study period.
A bulldozer was bought for ₱ 0.50M and have an estimated useful life of 10 years after which itwill have a scrap value of ₱0.05M. Repair and maintenance is placed at ₱ 35T annually, while cost for fuel,oil, lubricant and operator plus helper will be ₱ 12T monthly. Determine the following: What is the annual cost using the straight line method for computing depreciation when the minimumattractive rate of return is 8%?
A contractor can buy dump trucks for ₱ 800,000 each or rent them for ₱ 1,200 per truck per day. The truck has a salvage value of ₱ 100,000 at the end of its useful life of 5 years. The annual cost of maintenance is ₱ 20,000. Using annual cost method and 14% interest rate, determine the number of days per year that a truck must be used to warrant its purchased. Use sinking fund method of depreciation.
What is the decision criteria for Payback Period (PBP) method? A construction company is considering the purchase of a new piece of equipment. Relevant information concerning the equipment follows: Cost of the equipment $220,000 Annual cost savings from new equipment $44,000 Life of the new equipment 10 years Compute the payback period for the equipment. If the company requires a payback period of five years or less, would the equipment be purchased?
am. 122.
The AW values for retaining a presently owned machine for additional years are shown in the table. Note that the values represent the AW amount for each of the n years that the asset is kept, i.e., if it is kept 5 more years, the annual worth is $-95,000 for each of the 5 years. Assume that future costs remain as estimated for the replacement study and that used machines like the one presently owned will always be available. (a) What is the ESL and associated AW of the defender at a MARR of 12% per year? (b) A challenger with an ESL of 7 years and an AWC = $-82,000 per year has been identified. Which AW will be less for the respective ESL periods? AW Value, $ per Year -81,000 -94,000 -83,000 -93,000 -95,000 Retention Period, Years 1 2 3 4 a) The ESL of the defender is year(s) with the lowest AW of $ b) The |(Click to select) has the lower AW at $| for n equal to
Subject: accounting
The table given below lists the relevant cost items for a specific system purchase. The operating expenses for the new system are $10,000 per year, and the useful life of the system is expected to be five years. The salvage value for depreciation purposes is equal to 25% of the hardware cost. Cost Item Cost Hardware $160,000 Training $15,000 Installation $15,000 a) What is the Book Value (BV) of the device at the end of year three if the Straight Line (SL) depreciation method is used? b) Suppose that after depreciating the device for two years with the SL method, the firm decides to switch to the double declining balance depreciation method for the remainder of the device's life (the remaining three years). What is the device's BV at the end of four years?
Choose the best