Answered: determine the minimum number of days…

Business

Finance

determine the minimum number of days per year the rig must be needed to justify its purchase.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 17EB: Caduceus Company is considering the purchase of a new piece of factory equipment that will cost...

See similar textbooks

Similar questions

Caduceus Company is considering the purchase of a new piece of factory equipment that will cost $565,000 and will generate $135,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return In Excel, see Appendix C.
Gardner Denver Company is considering the purchase of a new piece of factory equipment that will cost $420,000 and will generate $95,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further Instructions on internal rate of return in Excel, see Appendix C.
A land development company is considering the purchase of earth-moving equipment. The equipment will have a first cost of $190,000 and a salvage value of $70000 when the company sells it in 10 years. A service contract for maintenance on the equipment will cost $40000 per year. The operating cost is expected to be $260 per day. Alternatively, the company can rent the necessary equipment for $1100 per day and hire a driver at $180 per day. If the company's MARR is 10% per year, how many days per year must the company need the equipment in order to justify its purchase? Alternatively
A contractor has to choose one of the following alternatives in performing earthmoving contracts: A. Buy a heavy-duty truck for $35,000. Salvage value is expected to be $8000 at the end of the vehicle’s 7-year depreciable life. Maintenance is $2500 per year. Daily operating expenses are $200. B. Hire a similar unit for $550 per day. Based on a 10% after-tax rate of return, how many days per year must the truck be used to justify its purchase? Base your calculations on straight-line depreciation and a 28% income tax rate.
Bridgewell Industries is evaluating the option of purchasing a fork-lift truck costing $60,000. If purchased, the truck will replace 4 workers, each with an average annual salary of $15,000. However, an experienced fork-lift operator will have to be hired at a salary of $20,000 per year. Fuel and maintenance expense is expected to be $10,000 per year. At the end of its 5-year life, the truck will have a market value of $10,000. Bridgewell uses straight-line depreciation and depreciates the asset to $0, assigns a 10% required rate of return for this type of investment, and has a marginal tax rate of 40%. Should the fork-lift truck be purchased? Please show all of your work
Peachtree Construction Company, a highway contractor, is considering the purchase of a new trench excavator that costs $300,000 and can dig a 3-foot-wide trench at the rate of 16 feet per hour. The contractor gets paid according to the usage of the equipment. $100 per hour. The expected average annual usage is 500 hours, and maintenance and operating costs will be $10 per hour. The contractor will depreciate the equipment by using a five-year MACRS, units-of-production method. At the end of five years, the excavator will be sold for $100,000.(a) Assuming that the contractor's marginal tax rate is 35% per year, determine the annual after-tax cash flow.(b) Is this a good investment if the contractor requires 15% return on investment?
A construction firm is considering establishing an engineering computing center. The center will be equipped with three engineering workstations that cost $45,000 each, and each has a service life of five years. The expected salvage value of each workstation is $2,000. The annual operating and maintenance cost would be $25,000 for each workstation. At a MARR of 15%, determine the equivalent annual cost for operating the engineering center. Click the icon to view the interest factors for discrete compounding when MARR= 15% per year. C The equivalent annual cost is $thousand. (Round to the nearest whole number.) More Info Worth Single Payment Compound Present Amount Factor (F/P, i, N) 1.1500 Compound Amount Factor (F/A, i, N) Factor (P/F, i, N) 0.8896 1.0000 1.3225 0.7561 2.1500 1.5209 0.6575 3.4725 0.5718 4.9934 1.7490 2.0114 0.4972 6.7424 0.4323 8.7537 0.3759 11.0688 2.3131 2.6800 3.0590 3.5179 0.3269 13.7268 0.2843 16.7858 4.0456 0.2472 20.3037 SAWNIN 2 3 4 5 67899 10 Equal Payment…
Midwest Fabricators Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $132,000 with a $16,000 residual value and a 10-year life. The equipment will replace one employee who has an average wage of $34,000 per year. In addition, the equipment will have operating and energy costs of $5,380 per year. Determine the average rate of return on the equipment, giving effect to straight-line depreciation on the investment. If required, round to the nearest whole percent.
Maui Fabricators Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $123,000 with a $11,000 residual value and a ten-year life. The equipment will replace one employee who has an average wage of $22,500 per year. In addition, the equipment will have operating and energy costs of $5,940 per year. Determine the average rate of return on the equipment, giving effect to straight-line depreciation on the investment. If required, round to the nearest whole percent.
Briggs Excavation Company is planning an investment of $108,600 for a bulldozer. The bulldozer is expected to operate for 2,000 hours per year for six years. Customers will be charged $105 per hour for bulldozer work. The bulldozer operator costs $34 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $20,000. The bulldozer uses fuel that is expected to cost $45 per hour of bulldozer operation. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Question Content Area a. Determine the equal annual net cash flows from operating the bulldozer. Use a minus sign to…
A Funiture Factory is considering buying a new automated planing machine for a cost of $80,250. This price includes a complete guarantee of the maintenance costs for the first two years, and it covers a good proportion of the maintenance costs for years 3 and 4. The company's portion of the maintenance cost is estimated to be $1,000 in year 3 and $3,000 in year 4. Depreciation on the capital cost would be 7% per year. Determine the Economic Life and EAC* of the new machine assuming the MARR is 6.5% and that there will be an installation cost of $2,800. PLEASE PLEASE SHOW FULL DETAILED STEPS! THANK YOU!
A Funiture Factory is considering buying a new automated planing machine for a cost of $80,250. This price includes a complete guarantee of the maintenance costs for the first two years, and it covers a good proportion of the maintenance costs for years 3 and 4. The company’s portion of the maintenance cost is estimated to be $1,000 in year 3 and $3,000 in year 4. Depreciation on the capital cost would be 7% per year. Determine the Economic Life and EAC* of the new machine assuming the MARR is 6.5% and that there will be an installation cost of $2,800. PLEASE PLEASE SHOW FULL DETAILED STEPS