Mr Dela Cruz is going to buy a new machine for manufacturing its product: Machine A has a first cost of P50,000; annual maintenance P6,000; life 12 years and salvage value of P2,000. Machine B has a first cost of P140,000; annual maintenance P2,500, life 36 years and salvage value P10,000. Money is worth 9%. What is the rate of return on additional investment? show solution A. 6.5% B. 7.4% C. 5.93% D. 10.5%
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Mr Dela Cruz is going to buy a new machine for manufacturing its product: Machine A has a first cost of P50,000; annual maintenance P6,000; life 12 years and salvage value of P2,000. Machine B has a first cost of P140,000; annual maintenance P2,500, life 36 years and salvage value P10,000. Money is worth 9%. What is the rate of
A. 6.5%
B. 7.4%
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- Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated revenue producing lite of 4 years. Mason has a required rate of return that is 12% and a cost of capital of 11%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?Answer number 4 only. You are planning to invest in a machine for your manufacturing facility. The machine costs P55,400, and it has an expected useful life of 5 years. You estimate that the machine will generate an annual net cash flow (revenue minus expenses) of P21,000. The interest rate is 5% per year. 1. Disregarding the revenue, what is the future value of the machine cost? 2. What is the present value of the revenue in its 5 years of useful life? Is it worth the investment compared to the machine cost? 3. What is the future value of the revenue in its 5 years of useful life? is it worth the investment compared to the future value of the machine cost? 4. Suppose that at there is a maintenance expense of P3,000 at the first year, P3,500 at the second year, P4,000 at the third year, P4,500 at the fourth year, and P5,000 at the last year. What is the present value of the maintenance expenseYou are planning to invest in a machine for your manufacturing facility. The machine costs P55,400, and it has an expected useful life of 5 years. You estimate that the machine will generate an annual net cash flow (revenue minus expenses) of P21,000. The interest rate is 5% per year. 1. Disregarding the revenue, what is the future value of the machine cost? 2. What is the present value of the revenue in its 5 years of useful life? Is it worth the investment compared to the machine cost? 3. What is the future value of the revenue in its 5 years of useful life? is it worth the investment compared to the future value of the machine cost? 4. Suppose that at there is a maintenance expense of P3,000 at the first year, P3,500 at the second year, P4,000 at the third year, P4,500 at the fourth year, and P5,000 at the last year. What is the present value of the maintenance expense?
- Assumption Corporation is considering replacing an obsolete machine with a new machine. The new machine would cost P250,000 and would have a ten-year useful life. The new machine would cost P12,000 per year to operate and maintain, but would save P55,000 per year in labor and other costs. The old machine can be sold now for P10,000. The simple rate of return on the new machine is closest to: a. 17.9% b. 7.5% c. 22.0% d. 7.2%1 Abusiness is considering the option of buying a plece of equipment that has a life of 5 years. The original cost of the equipment is RMS50,000 and the interest rate is 10%, It is expected that the net cash flow is RM15,000 annually and the salvage value is RMS,000. Required a. What is the NPV? b. Recommend whether the investment is feasible.A small machine has an initial cost of 20000, a salvage value of 2000 and a life of 10 years. If your cost of operation per year is 3500 and your revenues per year is 9000, what is the approximate rate of return (ROR) on the investment?
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