End of Year, k MV, End of Year k Annual Expenses, Ek $6,000 4,500 3,000 1,500 $8,250 9,900 11,700 13,200 1234 TABLE 9-2 Determination of the Economic Life, N*, of a New Asset (Example 9-4) (4) Cost of (6) [= (3) + (4) + (5)] Total (Marginal) Cost for Year (3) (7) EUAC through Year k (5) Loss in Market Capital = 10% (1) (2) End of MV, End Annual Value (MV) Year, k of Year k during Year k of Beginning Expenses (Ek) of Year MV (TCx) $30,000 1 22,500 $7,500 $3,000 $3,000 $13,500 $13,500 2 16,875 5,625 2,250 4,500 12,375 12,964 3 12,918 N* = 3 12,750 9,750 4,125 1,688 7,000 12,813 4 3,000 1,275 10,000 14,275 13,211 5 7,125 2,625 975 13,000 16,600 13,766 a EUAC; = E TC;(P/F, 10%,j)|(4/P, 10%, k) 2j=l
End of Year, k MV, End of Year k Annual Expenses, Ek $6,000 4,500 3,000 1,500 $8,250 9,900 11,700 13,200 1234 TABLE 9-2 Determination of the Economic Life, N*, of a New Asset (Example 9-4) (4) Cost of (6) [= (3) + (4) + (5)] Total (Marginal) Cost for Year (3) (7) EUAC through Year k (5) Loss in Market Capital = 10% (1) (2) End of MV, End Annual Value (MV) Year, k of Year k during Year k of Beginning Expenses (Ek) of Year MV (TCx) $30,000 1 22,500 $7,500 $3,000 $3,000 $13,500 $13,500 2 16,875 5,625 2,250 4,500 12,375 12,964 3 12,918 N* = 3 12,750 9,750 4,125 1,688 7,000 12,813 4 3,000 1,275 10,000 14,275 13,211 5 7,125 2,625 975 13,000 16,600 13,766 a EUAC; = E TC;(P/F, 10%,j)|(4/P, 10%, k) 2j=l
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
It is desired to determine how much longer a forklift truck should remain in service before it is replaced by the new truck (challenger) for which data were given in the shown Table. The defender in this case is two years old, originally cost $19,500, and has a present realizable MV of $7,500. If kept, its MVs and annual expenses are expected to be as follows: Determine the most economical period to keep the defender before replacing it (if at all) with the present challenger of Example. The before -tax cost of capital (MARR) is 10% per year. A new forklift truck will require an investment of $30,000 and is expected to have year-end MVs and annual expenses as shown in columns 2 and 5, respectively, of Table. If the before-tax MARR is 10% per year,
Transcribed Image Text:End of Year, k MV, End of Year k Annual Expenses, Ek
$6,000
4,500
3,000
1,500
$8,250
9,900
11,700
13,200
1234
![TABLE 9-2 Determination of the Economic Life, N*, of a New Asset (Example 9-4)
(4)
Cost of
(6)
[= (3) + (4) + (5)]
Total (Marginal)
Cost for Year
(3)
(7)
EUAC
through
Year k
(5)
Loss in Market Capital = 10%
(1)
(2)
End of MV, End
Annual
Value (MV)
Year, k of Year k during Year k
of Beginning Expenses
(Ek)
of Year MV
(TCx)
$30,000
1
22,500
$7,500
$3,000
$3,000
$13,500
$13,500
2
16,875
5,625
2,250
4,500
12,375
12,964
3
12,918 N* = 3
12,750
9,750
4,125
1,688
7,000
12,813
4
3,000
1,275
10,000
14,275
13,211
5
7,125
2,625
975
13,000
16,600
13,766
a EUAC; = E TC;(P/F, 10%,j)|(4/P, 10%, k)
2j=l](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9e2c8d7d-6f75-4305-b5ab-b8fd4112049c%2F7c776803-6110-4b23-82bd-8ca16fad3b5c%2F691f4sg_processed.png&w=3840&q=75)
Transcribed Image Text:TABLE 9-2 Determination of the Economic Life, N*, of a New Asset (Example 9-4)
(4)
Cost of
(6)
[= (3) + (4) + (5)]
Total (Marginal)
Cost for Year
(3)
(7)
EUAC
through
Year k
(5)
Loss in Market Capital = 10%
(1)
(2)
End of MV, End
Annual
Value (MV)
Year, k of Year k during Year k
of Beginning Expenses
(Ek)
of Year MV
(TCx)
$30,000
1
22,500
$7,500
$3,000
$3,000
$13,500
$13,500
2
16,875
5,625
2,250
4,500
12,375
12,964
3
12,918 N* = 3
12,750
9,750
4,125
1,688
7,000
12,813
4
3,000
1,275
10,000
14,275
13,211
5
7,125
2,625
975
13,000
16,600
13,766
a EUAC; = E TC;(P/F, 10%,j)|(4/P, 10%, k)
2j=l
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