Dallus Car Rental costs $280,000. It isexpected to generate a net income of$70,000 at the end of every year for 5 years.At the end of the 5 years, it has a salvagevalue of $60,000. What is the payback periodof this business?Question options:3.41 years4.86 years4.00 years0.86 years3.14 years

The payback period refers to the time consumed for recovery of the amount of the initial…

Answered: Dallus Car Rental costs $280,000. It is…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 19P

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1. Samos Excavating is considering purchasing some new equipment for the company. Due to the expense involved, the equipment company is giving Samos the option of choosing among four different payments plans. 1) $500,000 due immediately in cash 2) $150,000 down payment due immediately; $60,000 per year for 10 years, beginning at the end of the current year 3) $150,000 down payment due immediately; $30,000 per year for 4 years beginning at the end of the current year; $80,000 per year for 8 years beginning at the end of the fourth year after the initial purchase 4) $65,000 due immediately and at the beginning of each of the next 11 years Required: Samos will select the payment plan with the lowest present value. The effective interest rate during the future periods is 10%. Which option should Samos choose?
PART A.) A company is considering the purchase of a piece of equipment for $78,100. If instead the company waits 3 years the machine appreciates in value at 5% per year interest. How much money does the company have to save per year, to afford the equipment in Year 3?
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What will be the annual cash outflows for Mimi Inc. if it leased a milling machine for $8,200 per year for 5 years. Assume that the new machine cost $42,000 and will depreciate on a straight line basis over the 5 years and that Mimi has a tax rate of 32 percent. Select one: O a. $42,000 O b. -$8,264 O . - $2,688 O d. - $5,576 O e. $33,800
Two plans are available for a company to obtain automobiles for its salesmen. How many miles must the cars be driven each year for the two plans to have the same costs? Use an interest rate of 10%. Plan A: Lease the cars and pay PO.52 per mile. Plan B: Purchase the cars for P9.238 and economic life of three years after which it can be sold for P2,021, Gas and oil cost PO.07 per mile. Insurance is P500 per year.
Your company purchases a new building for $500,000. The upkeep and maintenance of the building ends up costing $10,000 annually. If your company intends to use the building for 20 years, how much will this building be in present money if interest is 5%? $885,660.00 $579,342.00 $6,355,620.00 $735,460.00 $624,620.00 $700,000.00
Two plans are available for a company to obtain automobiles for its salesmen. Use an interest rate of 10%. Plan A: Lease the cars and pay $0.20 per mile. Plan B: Purchase the cars for $6000 and economic life of three years, after which it can be sold for $1200. Gas and oil cost $0.05 per mile. Insurance is $500 per year A. What is annual cost for plan B? B. What is the annual cost of plan A if the miles driven by the car is 10,000?
A small construction company is considering the purchase of a used bulldozer for 100,000 SR. They don't have enough cash now to pay this amount and decided to pay equal amounts for the coming 7 years, starting from the end of the first year. How much to pay annually if the interest rate is 5%. a. 16455 O b. 13826 C. 14217 O d. 18341 e. 15781
The price of a car depreciates by 25% each year. Find the price of a car after 5 years if it is currently worth 37000OMR. Select one: а. 8780.273 OMR b. 46250 OMR С. 227750 OMR d. None of the above
You are a small business owner and have purchased a $10,000 asset that you can depreciate over four years ($2,500/per year). Under accelerated depreciation, you would be allowed to depreciate 75% of the asset's value immediately in the first year and the remaining 25% in the second year. Assume that the discount rate is 10%. Further suppose that your business usually makes $56,000 of annual profit, on which it pays a 21% tax every year. Should you claim accelerated depreciation, or should you depreciate the asset over the 4 years at $2,500 per year?
1-Suppose you own restaurant. You buy a new pizza oven for $110,000. The oven can be sold for $30,000 after seven years. What is the third year's depreciation charge that you can deduct from your income using: 'Straight-line depreciation? DDB depreciation? MACRS depreciation assuming 5-year property class (use the MACRS table available on blackboard)
Assume you paid cash for a beach house in Florida a while back and that you are now wanting to sell it. You have two offers for the house as follows: 1. $500,000 paid immediately (spot market sale) 2. $520,000 paid 1 year from now (Forward sale) Here is a list of the annual cost/income considerations: ● Property tax: $5,000 Insurance: $3,000 HOA dues: $4,000 Maintenance: $3,000 Rental Income: $35,000 What is the fair value forward price from your perspective? Opportunity cost of not receiving the 500K today is the money-market rate of 5% = $25,000 for 1 year ● $535,000 $540,000 $505,000 $495,000 $520,000

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