Sam is buying a refrigerator. He has two choices. A used one, at $475, should last him about three years. A new one, at $1225, would likely last eight years. Both have a scrap value of zero. Use an IRR analysis to determine which of the two alternatives is best. The MARR is 8 percent. Use the repeated lives method to deal with the unequal service lives of the two alternatives. Considering the alternatives in the order of lowest first cost, the best option is ▼which has an incremental rate of return of %. (Type an integer or decimal rounded to two decimal places as needed. Use an approximate ERR if the IRR cannot be used.)

Sam is buying a refrigerator. He has two choices. A used one, at $475, should last him about three years. A new one, at $1225, would likely last eight years. Both have a scrap value of zero. Use an IRR analysis to determine which of the two alternatives is best. The MARR is 8 percent. Use the repeated lives method to deal with the unequal service lives of the two alternatives. Considering the alternatives in the order of lowest first cost, the best option is ▼which has an incremental rate of return of %. (Type an integer or decimal rounded to two decimal places as needed. Use an approximate ERR if the IRR cannot be used.)

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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Gateway Tours is choosing between two bus models. One is more expensive to purchase and maintain, but lasts two years longer than the other. Gateway's discount rate is 9%. It plans to continue with one of the two models for the foreseeable future. Based on the equivalent annual costs of each, shown below, which should it choose? [Note: I have tried to make it easier for you to solve this problem. You do not need to do extra, unnecessary calculations merely to show me your work.] Model Old R Year 0 $0 Year 1 -$29 Year 2 -$29 Year 3 Year 4 -$29 Year 5 -$29 -$29 Year 6 -$29 S & S $0 -$27 -$27 -$27 -$27 Which bus should Gateway Tours choose, and why? because $ is better than $ Give me the name of the bus that should be chosen, and the final numbers that justify your answer. Your answer must take the form: "Choose B IUS Ix = = X₂ x² Insert Formula 14 !!! !!! H IM
You are asked to determine whether to replace a machine that was purchased 5 years ago for $10,000 with a new and better version that just came out. It cost the same price but offers twice the benefit and 50% less maintenance cost. What should you take into consideration in your analysis and what should you ignore?
Your friend Harold is trying to decide whether to buy or lease his next vehicle. He has gathered information about each option but is not sure how to compare the alternatives. Purchasing a new vehicle will cost $29,500, and Harold expects to spend about $800 per year in maintenance costs. He would keep the vehicle for five years and estimates that the salvage value will be $11,700. Alternatively. Harold could lease the same vehicle for five years at a cost of $3.835 per year, including maintenance. Assume a discount rate of 10 percent. Required: 1. Calculate the net present value of Harold's options. (Euture Value of $1. Present Value of $1. Euture Value Annuity of $1. Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Negative amounts should be indicated by a minus sign. Round your final answers to 2 decimal places. Do not round intermediate calculations.) NPV Purchase Option Lease Option
Lou buys bottles of water from the grocery store, but is now considering the environmental ramifications of the waste. He is considering getting a water filtration system in his home, but it will cost $1.000, which would mean he would take out a small loan at 7% interest for one year. If bottled water costs $7 a week, what would be the difference in the costs after one year?
Your friend Harold is trying to decide whether to buy or lease his next vehicle. He has gathered information about each option but is not sure how to compare the alternatives. Purchasing a new vehicle will cost $27,500, and Harold expects to spend about $600 per year in maintenance costs. He would keep the vehicle for five years and estimates that the salvage value will be $10,900. Alternatively, Harold could lease the same vehicle for five years at a cost of $3,575 per year, including maintenance. Assume a discount rate of 12 percent. Required: Calculate the net present value of Harold’s options. (Future Value of $1,Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) Advise Harold about which option he should choose.
The Atlantic Medical Clinic can purchase a new computer system that will save $7,000 annually in billing costs. The computer system will last for nine years and have no salvage value. Click here to view Exhibit 14B-1 and Exhibit 14B-2 to determine the appropriate discount factor(s) using tables. Required: What is the maximum price (l.e., the price that exactly equals the present value of the annual savings in billing costs) Atlantic Medical Clinic should be willing to pay for the new computer system if the clinic's required rate of return is: Note: Round your final answer to the nearest whole dollar amount. Maximum Price 1. Seven percent 2. Eleven percent
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A distribution company is considering three different alternatives to satisfy their customer's demands. Their options are to rent a ready distribution center (D01), Rent and mobilize a center (D02), or outsourcing (OS). The estimate for each method is shown. The lifetime for D01, D02, and OS are 3, 6, and 2 respectively. MARR is 0.04 per year. and the percentage of change for all of the cases are 0 % Note: all units are in thousand $ D01 D02 OS First Cost, $ -136 -973 0 Annual Operation Cost,$ -92 -59 -123 Salvage Value,$ 28 333 0 a: Calculate the Fw of D01? b) Calculate FW for D02 c )What is the FW for outsourcing? d: Which alternative will be selected? f: Draw the cash flow for all of these three alternatives. If contract value with subcontractor increases by 15 % every year calculate FW for Outsourcing. Is there any change in your previous decision on the basis of the new condition? If yes, which…
Your friend Harold is trying to decide whether to buy or lease his next vehicle. He has gathered information about each option but is not sure how to compare the alternatives. Purchasing a new vehicle will cost $28,000, and Harold expects to spend about $650 per year in maintenance costs. He would keep the vehicle for five years and estimates that the salvage value will be $11,100. Alternatively, Harold could lease the same vehicle for five years at a cost of $3,640 per year, including maintenance. Assume a discount rate of 10 percent. Required: 1. Calculate the net present value of Harold's options. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Negative amounts should be indicated by a minus sign. Round your final answers to 2 decimal places. Do not round intermediate calculations.) Purchase Option Lease Option NPV

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