Can someone set up an excel sheet using the following data and show me the formula side, so I know how to replicate this type of problem later on? I don't understand where we get the values from the solution excel sheet I attached in the images. Thanks in advance!
Can someone set up an excel sheet using the following data and show me the formula side, so I know how to replicate this type of problem later on? I don't understand where we get the values from the solution excel sheet I attached in the images. Thanks in advance!
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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Question
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Can someone set up an excel sheet using the following data and show me the formula side, so I know how to replicate this type of problem later on? I don't understand where we get the values from the solution excel sheet I attached in the images. Thanks in advance!
Transcribed Image Text:38
39
Replacement Anaylsis
SOLUTION: REPLACE THE
40
Defender
O $ (10,000.00) $ (10,000.00)
41
Market Price
$
10,000.00
1 $
(8,000.00) $
(7,142.86)
DEFENDER
42
Remaining Useful Life
3 Years
2 $
(8,000.00) $
(6,377.55)
(3,914.79)
$ (27,435.20)
$ (11,422.62)
43
Salvage Value
$
2,500.00
3 $
(5,500.00) $
$5,500
44
O&M Costs
$
8,000.00 Annually
PV
Defender
Challenger
$2,500
45
AE
Years
Years
1
3
46
Challenger
47
Cost
$
15,000.00
48
Useful Life
3 Years
$6,000
$8,000
49
Salvage Value
$
5,500.00
$10,000
(a)
(Ь)
$
6,000.00 Annually
O $ (15,000.00) $ (15,000.00)
50
O&M Cost
51
1 $
(6,000.00) $
(5,357.14)
Proceeds from sale viewed as
$15,000
an opportunity cost of keeping
the asset
52
MARR
12%
2 $
(6,000.00) $
(4,783.16)
PW(12%)p = $10,000 + $8,000(P/A, 12%,3)
53
3 $
(500.00) $
(355.89)
- $2,500(P/F, 12%, 3)
PV $ (25,496.20)
$ (10,615.32)
54
= $27,435
AEC(12%)d = PW(12%)p(A/P, 12%, 3)
55
AE
= $11,423
56
PW(12%)c = $15,000 + $6,000(P/A, 12%,3) – $5,500(P/F, 12%, 3)
57
= $25,496
AEC(12%)c = PW(12%)c(A/P, 12%, 3)
58
= $10,615
59
Transcribed Image Text:Example 14.2: Opportunity Cost
Approach
O Given:
o Defender
Market price: $10,000
Remaining useful life: 3
years
Salvage value: $2,500
O&M cost: $8,000
$5,500
Defender
Challenger
$2,500
Years
Years
2
2
o Challenger
• Cost: $15,000
Useful life: 3 years
$6,000
S8,000
$10,000
(a)
Proceeds from sale viewed as
an opportunity cost of koeping
the asset
$15,000
Salvage value: $5,500
O&M cost: $6,000
O Find: Replace the
defender now?
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