money should the company set aside now to cover all the repair costs
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A construction company recently purchased a crane with a 6-year warranty that covers maintenance and repairs. The company plans on using the crane for 15 years, and wants to set aside money now to pay for the repairs once the warranty expires. The repair costs are expected to average $13,500 a year at the 7th year and beyond, with a large overhaul cost of $20,000 in the 9th year of operation and another overhaul cost of $35,000 in the 12th year of operation. Assuming an interest rate of 4%, answer the following questions:
How much money should the company set aside now to cover all the repair costs for the 15-year lifespan?
( Ans: $115,237.39, can someone explain how it got to this . please I need stepwise solution )
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- Wildhorse Company manufactures a check-in kiosk with an estimated economic life of 10 years and leases it to Sheffield Chicken for a period of 9 years. The normal selling price of the equipment is $172,124, and its unguaranteed residual value at the end of the lease term is estimated to be $26,200. Sheffield will pay annual payments of $20,800 at the beginning of each year. Wildhorse incurred costs of $141,100 in manufacturing the equipment and $2,400 in sales commissions in closing the lease. Wildhorse has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%. Sheffield Chicken has an incremental borrowing rate of 5%. The lessor's implicit rate is unknown to the lessee.Yummy Food is expanding its business and wants to open a new facility to make frozen lasagna, which requires a new automated lasagna maker. A lasagna maker can be purchased for $350,000 or leased under a finance lease over 7 years, with lease payments to be made at the beginning of each year. If the company purchases the lasagna maker, it can be fully depreciated to zero using the straight-line method over seven years. The management expects the scrap/residual value of the lasagna maker to be $60,000 at the end of the lease. After a detailed analysis of the project, Yummy Food determines the appropriate after-tax cost of capital of the project to be 15% per annum. Yummy Food pays a corporate tax rate of 28% and it can borrow funds at a before-tax interest rate of 5% per annum. All cash-flows have been quoted on a before-tax basis. Given this information, what is the lease payment (per annum) that would make Yummy Food indifferent between leasing and borrow-to-buy the machine? (Using…Blackstone Company purchased a new software system costing $35,000. To finance the purchase, Blackstone signed a contract agreeing to pay the cost over the next 8 years, with a payment due every six months; the first payment will be made six months from the date of purchase. Blackstone's usual interest rate is 10%. What is the amount of the payment required (rounded to the nearest dollar)? 's usual 096, What is the amount of the Select one: O a. 16,030 O b. 6,560 O c. 3,229 d. 2,575 e. None of the above
- Sheffield Excavating Inc. is purchasing a bulldozer. The equipment has a price of $93,800. The manufacturer has offered a payment plan that would allow Sheffield to make 10 equal annual payments of $18,700.00, with the first payment due one year after the purchase. How much total interest will Sheffield pay on this payment plan? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Total interest $ Sheffieldcould borrow $93,800 from its bank to finance the purchase at an annual rate of 9%.Click here to view factor tablesShould Sheffield borrow from the bank or use the manufacturer’s payment plan to pay for the equipment? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 7%.) Manufacturer's rate %Benford Inc. is planning to open a new sporting goods store in a suburban mall. Benford will lease the needed space in the mall. Equipment and fixtures for the store will cost $450,000 and be depreciated to $0 over a 5-year period on a straight-line basis. The new store will require Benford to increase its net working capital by $450,000 at time 0.First-year sales are expected to be $1.05 million and to increase at an annual rate of 8 percent over the expected 10-year life of the store. Operating expenses (including lease payments but excluding depreciation) are projected to be $850,000 during the first year and to increase at a 7 percent annual rate. The salvage value of the store’s equipment and fixtures is anticipated to be $13,000 at the end of 10 years. Benford’s marginal tax rate is 40 percent. Calculate the store’s net present value, using an 18 percent required return. Use Table II to answer the question. Round your answer to the nearest dollar.$ Should Benford accept the…Bramble Corp. is purchasing new equipment with a cash cost of $312000 for an assembly line. The manufacturer has offered to accept $67900 payment at the end of each of the next six years. How much interest will Bramble Corp. pay over the term of the loan? O $95400. O $312000. O $67900. O $407400.
- Your client, Keith Buffalo Leasing Company, is preparing a contract to lease a machine to Souvenirs Corporation for a period of 27 years. Buffalo has an investment cost of $427,700 in the machine, which has a useful life of 27 years and no salvage value at the end of that time. Your client is interested in earning an 10% return on its investment and has agreed to accept 27 equal rental payments at the end of each of the next 27 years.Click here to view factor tablesYou are requested to provide Buffalo with the amount of each of the 27 rental payments that will yield an 10% return on investment. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Amount of each rental paymentsYour client, Keith Bridgeport Leasing Company, is preparing a contract to lease a machine to Souvenirs Corporation for a period of 25 years. Bridgeport has an investment cost of $428,800 in the machine, which has a useful life of 25 years and no salvage value at the end of that time. Your client is interested in earning an 12% return on its investment and has agreed to accept 25 equal rental payments at the end of each of the next 25 years. Click here to view factor tables You are requested to provide Bridgeport with the amount of each of the 25 rental payments that will yield an 12% return onYour client, Albert Jackson Leasing Company, is preparing a contract to lease a machine to Souvenirs Corporation for a period of 25 years. Jackson has an investment cost of $427,700 in the machine, which has a useful life of 25 years and no salvage value at the end of that time. Your client is interested in earning an 10% return on its investment and has agreed to accept 25 equal rental payments at the end of each of the next 25 years. Click here to view factor tables. You are requested to provide Jackson with the amount of each of the 25 rental payments that will yield an 10% return on investment. (Round factor values to 5 decimal places, eg. 1.25124 and final answer to 0 decimal places, e.g. 458,581) Amount of each rental payments
- Ovida company clinches a contract to supply cleaning services to a nursing home for the next 5 years. Under the contract, the company will be paid $1 million a year. To take up this contract, it would have to invest in new cleaning equipment costing $600,000 which will be depreciated straight-line to zero over 5 years. there is no salvage value at the end of 5 years. labour costs will be $300,000 per year and overheads $250,000 per year. the company will need to invest in net working capital of $350,000. it plans to issue $1 million worth of bonds for the next 5 years at a coupon rate of 6% and will price bonds at par. the company has an existing bank loan of $9 million. the cost of debt from a bank loan is the same as the bonds. the common stock of the company is selling for $10 per share and it has 2 million shares outstanding. expected dividend next year is $1 per share and dividends are expected to grow at 2% per annum. the tax rate is 20%. (a) compute the cost of equity b)…Sanders Enterprises, Inc., has been considering the purchase of a new manufacturing facility for $272,000. The facility is to be fully depreciated on a straight-line basis over seven years. It is expected to have no resale value after the seven years. Operating revenues from the facility are expected to be $107,000, in nominal terms, at the end of the first year. The revenues are expected to increase at the inflation rate of 5 percent. Production costs at the end of the first year will be $32,000, in nominal terms, and they are expected to increase at 6 percent per year. The real discount rate is 8 percent. The corporate tax rate is 34 percent. Calculate the NPV of the project. (Do not round intermediate calculations and round your answer to 2 decimal placesYou are assessing the minimum amount of investment that you will be willing to invest today for a billboard construction project. The useful life of the steel structure is 10 years. Monthly advertising space rental costs P120,000. Advertising contracts requires prepayment of the lease before commencing the rental. Rental revenue will be deposited in a deposit account with 2.5% interest rate, compounded quarterly. What is the minimum amount of investment for the billboard steel foundation today?