Question 7.The City of Lubbock has decided to buy a new snow removal machine to avert theoccasional snowpocalypse. Thus, the city of Lubbock decided to buy a new snowremoval machine. The officials can choose between two different machines:1. The Blizzard has a $70,000.00 first cost, life of 20 years and $8,000.00 salvagevalue. At the end of 9 years, it will need a major overhaul costing $9,000.00.Annual maintenance and operating costs are $9,000.00.2. The Snow Mower will cost $50,000.00, has an expected life of 10 years and hasno salvage value. The annual maintenance and operating costs are expected tobe $12,000.00Using a 12.00% interest rate, which machine should be chosen?

The time value of money is a concept in finance that takes into account the effect of compounding in…

Answered: Question 7. The City of Lubbock has…

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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3.XYZ drilling company purchased a high-end CNC milling center at $500,000 two years ago. The expected life of this machine is 10 years and the salvage value at that time $100,000. The company has done a major upgrading for the CNC machine last year, costed $15,000. The company has also spent $150,000 on its material handling system including a docking station, a rotation table, two pallets and an automatic loading/unloading robot arm. The CNC operating cost is $45,000 per year. Due to the recent oil price down turn this year, the company is contemplating to change the business to truck repair, and considering to replace the said CNC machine with a truck repair elevation platform. The current market value for the CNC machine is $250,000; while the supporting machinery would be valued very little, only $10,000, due to their specific functionality and the bad economy situation.What is the total sunk cost related to this replacement decision? Select one: a. $100,000 cross out b. $505,000…
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Assume that Walmart Inc. has decided to surface and maintain for 10 years a vacant lot next to one of its stores to serve as a parking lot for customers. Management is considering the following bids involving two different qualities of surfacing for a parking area of 11,300 square yards. Bid A: A surface that costs $5.25 per square yard to install. This surface will have to be replaced at the end of 5 years. The annual maintenance cost on this surface is estimated at 25 cents per square yard for each year except the last year of its service. The replacement surface will be similar to the initial surface. Bid B: A surface that costs $10.75 per square yard to install. This surface has a probable useful life of 10 years and will require annual maintenance in each year except the last year, at an estimated cost of 12 cents per square yard. Click here to view factor tables. Compute present value of the bids. You may assume that the cost of capital is 12%, that the annual maintenance…
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QUESTION C A local authority's Fire Service is considering replacement of a turntable ladder which although still serviceable, has steeply rising maintenance costs, and it is thought that a replacement will proof less expensive in the long term. The purchase cost of a new turntable ladder will be $360,000 - half payable immediately and half one year from now. The following information is available: - Existing 8 Years 8 years Replacement 8 Years 8 years Estimated useful life Estimated costs: Year 1 40,000 10,000 Year 2 45,000 10,000 Year 3 50,000 14,000 Year 4 60,000 15,000 Year 5 72,000 18,000 Year 6 80,000 18,000 Year 7 90,000 20,000 Year 8 98,000 22,000 Full Overhauls Year 2 5,000 Year 4 10,000 4,000 Year 6 14,000 Estimated Resale Value Now 10,000 Year 8 1,000 maintenance 8,000
I got the answers but looking for the equations as to how I solved it
1. A tank behind Tom’s service station has leaked a large quantity of heating oil into the soil below. If left uncontained,experts estimate a 10% chance that the oil will contaminate local drinking water and cause $3 million worth of repairs, and an additional 0.5% chance that the oil will reach both the local aquifer and neighboring waterways, causing a total of $10million worth of damage. 2.1. If these are the only risk factors, what is the expected value of damage from Tom’s tank? Show your calculations. 2.2. If Tom is willing to pay up to $355,00 to an insurance company to cover this risk, what is Tom’s risk burden? Show your calculations.
The City of Waltham wants to obtain the value of its 99 year old City Hall property. Your firm has been engaged to provide an estimate of value. You will use the Cost Approach to determine value. You will be required to estimate reproduction or replacement cost new (specify which is appropriate and why) and proceed through the steps of the Cost Approach to complete the task. Cost Estimates (000 omitted): Cost of new construction: $153,000; Since the last renovation 30 years ago, physical deterioration: $22,000; functional obsolescence: $6,000; external obsolescence: $2,000; four (4) comparable land values have been identified for the valuation estimate: $49,000; $35,000; $40,000; $52,000. Show your answer and the steps of your analysis below:
City of Oliver is considering automating a process in its accounting department that has been labor-intensive. The equipment currently used in the department can be sold. The new equipment will have a projected useful life of 10 years. The old equipment has a remaining useful life of 10 years. The following data are available to be used in making the decision. Should the city invest in the new equipment? Support your answer with appropriate calculations. Current equipment Current equipment book value $ 30,000 Annual depreciation charges 3,000 Current estimated disposal value 5,000 New equipment Cost $150,000 Annual depreciation charge 12,500 Expected disposal value 25,000 Labor savings each year $ 50,000 Present value factors @ 6% $1…

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