Asset X will have a useful life of 10 years and cost $4M; it will have installation costs of $200,000 and a salvage value of $500,000. Asset Y will have a useful life of 6 years and cost $3M; it will have installation costs of $150,000 and a salvage value of $400,000. Which asset will have the greater annual straight-line depreciation and by how much? A. X by $95,000 B. Y by $145,000 C. X by $175,000 D. Y by $88,333.33
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- Part a) Use a 10% MARR to determine the economic service life (ESL) of a defender asset (and the corresponding annual worth (AW) value) with the following characteristics: First cost = $70,000 Estimated annual operating cost (AOC) = $20,000 per year Maximum remaining useful life = 4 years Salvage value = $10,000 anytime it is replaced Part b) Determine the ESL and corresponding AW of the asset using more precise estimates as follows: AOC will be $20,000 in the first year and then increase by 15% per year Maximum remaining useful life = 8 years Salvage value will be $10,000 at EOY 1 and then decrease by $1,000 per yearA piece of equipment has a first cost of $75000, a maximum useful life of 4 years, and a market (salvage) value described by the relation Sk = 60000 – 10500k, where k is the number of years since it was purchased. The AOC series is estimated using AOC = 30000 + 4500k. The interest rate is 9% per year. When should the company replace this asset?What is the capitalized cost of an asset that has a purchasing cost of P500,000.00 and needs a yearly upgrading cost of P8,000.00 for the first 5 years and P10,000.00 after. Also it needs a modification cost of P11,434,000.00 every 10 years. The life of the asset is 20 years with no salvage value. What is the present worth in pesos needed to operate this asset and if money is worth 0.1 per annum?
- .1. An asset with a first cost of $20,000 has an annual operating cost of $12,000 and a $4000 salvage value after its 4-year life. Determine the capital recovery amount over the 4-year life if a MARR of 10% per year is required.PART A.) Decide which of the following machines should be selected (if one of them MUST be selected) using a Present Worth Analysis assuming 8% interest. I want to see PWp and PW calculated as part of the decision. First Cost, $ Annual Operating Cost, $/year Salvage Value, $ Life, years 20,000 4,000 15,000 5,000 5,000 2 5,000Equipment A has a first cost of P50000, salvage value of P2000, life of equipment of 5 years and maintenance cost of P6000. Equipment B has a first cost of P150,000, salvage value of P6000, life of equipment of 15 years and maintenance cost of P3000. If the maximum rate or return is 12% annually for both equipment, find the ROR of additional investment of equipment B. Select the correct response: 4.51 6.69 13.45 7.52
- (5) The amount of the average investment for a proposed investment of $172,000 in a fixed asset with a useful life of 4 years, straight-line depreciation, no residual value, and an expected total net income of $28,300 for the 4 years is?Given the following information and assuming straight-line depreciation to zero, what is the IRR of this project? Initial investment = $400,000; life = four years; cost savings = $125,000 per year; salvage value = $20,000 in year 5; tax rate = 34%; discount rate = 12%.Multiple Choice7.51%9.43%10.24%6.25%8.15%for this equipment. 0. Calculating Salvage Value Consider an asset that costs $635,000 and is depreciated straight-line to zero over its eight-vear tax life. The asset is to be used in a five-year project; at the end of the project, the asset can be sold for S105,000. If the relevant tax rate is 22 percent, what is the aftertax cash flow from the sale of this asset? LO 2
- 4. Determine the capitalized cost of a research laboratory that requires P5M for original construction; P100,000 at the end of every year for the first 6 years and then P120,000 each year thereafter for operating expenses, and P500,000 every 5 years for replacement of equipment with interest at 12% per annum? 5. A machine cost P8000 and an estimated life of 10 years with a salvage value of P500. What is its book value and total depreciation after 8 years using the straight line method? i 6. An engineer bought an equipment for P500,000. He spent an additional amount of P30000 for installation and other expenses. The salvage value is 10% of the first cost. If the book value at the end of 5 years will be P291,500 using the straight line method of depreciation, compute the useful life of the equipment in years.1.) A project is estimated to cost P100,000, lasts 8 years and have a P10,000 salvage value. The annual gross income is expected to average P24,000, and annual expenses, excluding depreciation will total P6,000. If capital is earning 10% before income tax, determine if this is a desirable investment using A.) Rate of Return Method and B.) Annual Cost or Worth Method. II. Gradients (Shows solutions manually): 2.) The year-end operating and maintenance costs of a certain machine are estimated to be P12,000 the first year and to increase by P2,500 each year during its 4-year life. If capital is worth 12%, determine the equivalent uniform year-end costs. 3.) Annual maintenance costs for an equipment are P1,500 this year and are estimated to increase 10% each year every year. What is the present worth of maintenance cost for six years if i = 12%B Company is considering two alternative ways to depreciate a proposed investment. The investment has an initial cost of P100,000 and an expected five-year life. The two alternative depreciation schedules follow: Method 1 Method 2 Year 1 depreciation P20,000 P40,000 Year 2 depreciation P20,000 P30,000 Year 3 depreciation P20,000 P20,000 Year 4 depreciation P20,000 P10,000 Year 5 depreciation P20,000 P0 Assuming that the company faces a marginal tax rate of 40 percent and has a cost of capital of 10 percent, what is the difference between the two methods in the present value of the depreciation tax benefit?