Problems 43 and 44 are based on thefollowing statement:UsedNewmachinemachineInitial Cost15,00040,000($)Annual8,0002,000operatingcost($/year)Salvage5,00010,000value ($)Life (years)36Use an interest rate of 10% per year43. The present worth of the newmachine is closest to:(A) $43,630(B) $43,066(C) $45,210(D) $49,66044. To compare the machines on thebasis of a present worth analysis, thepresent worth values to use are:(A) PWused $31,139, PW new = $43,066(B) PWused $31,139, PW new = $37,461(C) PWused $54,533, PW new = $43,066(D) PWused $54,533, PW new = $37,461

The objective of the question is to calculate the present worth of the new machine and to compare…

Answered: Problems 43 and 44 are based on the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Q3: The following table gives the operation cost, maintenance cost and salvage value at the end of every year of a machine whose purchase value is 25,000$. Find the economic life of the machine assuming interest rate, i = 15%. End of Year (n) 1 2 3 4 5 6 7 8 9 10 Cost operation at the end of year ($) 3000 4000 5000 6000 7000 8000 9000 10000 11000 12000 Maintenance cost at the end of year ($) 300 400 500 600 700 800 900 1000 1100 1200 Salvage value ate end of the year ($) 9000 8000 7000 6000 5000 4000 3000 2000 1000 500
Given the two machines' data Machine A Machine B First Cost P8,000.00 P14,000.00 Salvage value Annual operation 2,000.00 3,000.00 2,400.00 Annual maintenance 1,200.00 1,000.00 Taxes and insurance 3% 3% Life, years 10 15 Money is worth at least 16%. What is the exact rate of return?
The information below relates to the purchase of equipment: investment in the project: $10,000 Net annual cash inflows: 2,400 Working capital required: 5,000 Salvage value of the equipment: 1,000 Life of the project: 8 years At the completion of the project, the working capital will be released for use elsewhere. Compute the net present value of the project, using a discount rate of 10% $606 $8,271 ($1,729) $1,729
2. Now assume the company is considering two methods: automated method and manual system. The estimates for each method are shown below. Automated 400,000 30,000 (per 3 years) 150,000 (per year) 200,000 9 Manual 0 200,000 (per 6 years) 100,000 (per year) 500,000 Infinite First cost, $ Operating cost, $ Revenue, $ Salvage value Life, years The effective interest rate is 3% per quarter. Which alternative should be selected? Use Capitalized Cost Approach.
Please answer if you conform and give correct answer.
15. Given the following table of financial data for an asset that was bought today and whose service life is 3 years, what is its economic service life if the interest rate is 8%? Market Value ($) 23,000 18,000 15,000 12,000 Year (n) O&M Cost ($) 3,400 4,500 5,700 1 3
What is the present worth equivalent of the machine considered to be the most preferred choice? (i=10%) show detailed solution
onsider the following financial informationabout a retooling project at a computer manufacturing company:• The project costs $2.5 million and has a five-yearservice life.• The retooling project can be classified as sevenyear property under the MACRS rule.• At the end of the fifth year, any assets held for theproject will be sold. The expected salvage valuewill be about 10% of the initial project cost.• The firm will finance 40% of the project moneyfrom an outside financial institution at an interestrate of 10%. The firm is required to repay the loanwith five equal annual payments.• The firm’s incremental (marginal) tax rate on theinvestment is 35%.• The firm’s MARR is 18%.With the preceding financial information,(a) Determine the after-tax cash flows.(b) Compute the annual equivalent worth for thisproject.
The equivalent annual worth of alternative A over an infinite time period is closest to:a. $-25,000b. $-27,200c. $-31,600d. $-37,100
The equivalent annual worth of alternative A is closest to:a. $-25,130b. $-37,100c. $-41,500d. $-42,900
J3.
The following data relates to an investment proposal: Investment in equipment Net annual cash inflow $32,000 5,000 expected Working capital required Salvage value of equipment Life of the project 8,000 2,000 10 years Working capital will be recovered at the end of the project's life. Using an 6% discount rate, the net present value of the project is closest to: $10,380 ($2,084) None of the other answers are correct $5,916 $2,380

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