Green Power Company is considering acquiring a new machine that will last 14 years and it can be purchased right now for 116,319 dollars; maintenance will cost 23,444 dollars the first year, increasing by 6,434 dollars per year thereafter (e.g. maintenance at the end of year two is equal to 23,444 plus 6,434 dollars). If the interest rate is 7% per year, compounded annually, how much money should the company set aside now to purchase and provide for the future maintenance of this machine (NPV)? (note: round your answer to the nearest cent and do not include spaces, currency signs, or commas)

Green Power Company is considering acquiring a new machine that will last 14 years and it can be purchased right now for 116,319 dollars; maintenance will cost 23,444 dollars the first year, increasing by 6,434 dollars per year thereafter (e.g. maintenance at the end of year two is equal to 23,444 plus 6,434 dollars). If the interest rate is 7% per year, compounded annually, how much money should the company set aside now to purchase and provide for the future maintenance of this machine (NPV)? (note: round your answer to the nearest cent and do not include spaces, currency signs, or commas)

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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a company must buy new safety equipment every 8 years, costing $16,000, with a salvage value of $185O. A new type of equipment is coming on the market soon that will last 10 years and have a salvage value of 12% of the original cost. If money is worth 14.5% annually, compare the two possibilities and identify the highest price the company should pay for the new type of equipment.
A manufacturing company plans to buy a new piece of equipment for $70,000 which is expected to last 10 years and will have a salvage value of $10,000. The new equipment will require an overhaul at the end of year 5 at a cost of $21,000. If purchased, the new equipment will allow the company to generate new revenues of $12,000 at the end of each year. The company uses an interest rate of 8%. What is the Present Worth of the project?
Crow Corporation, a company that specializes in precision metal fabrication, is conducting a study to determine if it should update equipment now or later. If the cost 2 years from now is estimated to be $260,000, how much can the company afford to spend now if its minimum attractive rate of return is 12% per year compounded monthly?
MIG Tools can either lease or buy some equipment. The lease payments would be $12,800 a year and the purchase price is $35,900. The equipment has a 3-year life after which it is expected to have a resale value of $5,000. The firm uses 100 percent bonus depreciation, borrows money at 8 percent, and has a tax rate of 21 percent. What is the incremental cash flow for Year 1 if the company decides to lease the equipment rather than purchase it? Multiple Choice −$19,405 −$16,805 −$17,651 −$14,184 −$14,905
I have purchased a machine worth P1,665,509.00. And it needs maintenance at the end of every 6 months starting 5 years after its purchased date and maintenance will be needed for the next 10 years of its useful life. The maintenance cost is equivalent to the 2% of the total machine cost. How much money should be prepare today to finance the requirement if the interest rate is 0.10 compounded quarterly?
An income-producing property is expected to yield NOI of $100,000 in each of the next five years, with cash flows being received at the end of each period. At the end of the fifth year the property will be sold; the owner wishes to use a going-out cap rate of 7.3% for this transaction. For a cost of capital of 9.5 % annually, what is the value of this property today? Your Answer:
A laboratory might buy a new piece of equipment for $26,785. The equipment's useful life is 4 years, and its salvage value is $5000. The company will save $9000 per year for 4 years if it buys the equipment. Maintenance costs in year 1 will be zero, but will increase each year starting in year 2 by $500 per year (the first year is covered by a warranty). Determine the Equivalent Annual Worth if the company's cost of money is 10%.
Sauer Food Company has decided to buy a new computer system with an expected life of three years. The cost is $430,000. The company can borrow $430,000 for three years at 13 percent annual interest or for one year at 11 percent annual interest. Assume interest is paid in full at the end of each year. a. How much would Sauer Food Company save in interest over the three-year life of the computer system if the one-year loan is utilized and the loan is rolled over (reborrowed) each year at the same 11 percent rate? Compare this to the 13 percent three- year loan. 11 percent loan 13 percent loan Interest savings Interest b. What if interest rates on the 11 percent loan go up to 16 percent in year 2 and 19 percent in year 3? What would be the total interest cost compared to the 13 percent, three-year loan? Fixed-rate 13% loan Variable-rate loan Additional interest cost Interest
A company wants to purchase a piece of equipment that costs $18,000. In 8 years, that same piece of equipment is expected to have a salvage value of $5,000. The estimated annual maintenece cost is $1,000 in the first year, but is expected to increase by $300 each year thereafter. What is the present worth of the project, using a 10% interest rate.
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a company is considering the purchase of a new machine for 480,000. Management predicts that the machine can produce sales of 180,000 each year for the next 10 years. Expenses are expected to include direct materials, direct labor, and factory overhead totaling 120,000 per year including depreciation of 30,000 per year. The company's tax rate is 40%. What is the payback period for the new machine?
New equipment costs $847,000 and is expected to last for five years with the salvage value of 10% of the equipment cost. During this time the company will use a 20% CCA rate. The new equipment will save $280,000 annually before taxes. If the company's required rate of return is 5.35%, determine the PVCCATS of the purchase. Assume a tax rate of 35%. Please show all the calculations by which you came up with the final answer.

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