Suppose a machine has a current resale price of $6000 and an annual operating and maintenance cost of $2000. Each additional year thereafter, the operating and maintenance cost increases by five hundred and the resale value falls by thirty percent. The firm has a MARR of 9%. Using marginal analysis, find the cost of keeping the machine for its fourth year of service. The answer is with $20 of 4182 4222 4262 4302 4342

Suppose a machine has a current resale price of $6000 and an annual operating and maintenance cost of $2000. Each additional year thereafter, the operating and maintenance cost increases by five hundred and the resale value falls by thirty percent. The firm has a MARR of 9%. Using marginal analysis, find the cost of keeping the machine for its fourth year of service. The answer is with $20 of 4182 4222 4262 4302 4342

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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E2
Modern Artifacts can produce keepsakes that will be sold for $100 each. Nondepreciation fixed costs are $1,300 per year, and variable costs are $70 per unit. The initial investment of $4,000 will be depreciated straight-line over its useful life of 5 years to a final value of zero, and the discount rate is 12%. (For all the requirements, do not round intermediate calculations. Round your answer to the nearest whole number.) a. What is the accounting break-even level of sales if the firm pays no taxes? b. What is the NPV break-even level of sales if the firm pays no taxes?
8 years ago a company installed a robot that today has a market value of $60,000 and every year it drops $2000. For example at the end of the first year the market value will be $58,000 and it keeps going down. Maintenance costs for the next 4 years are estimated at $3,000 this year and increasing 10% each year. Determine the marginal cost of extending the service for one year, for the next 4 years if the MARR is 12%. Answer the questions: a) How much money would be the loss of market value in year 1? b) How much money would be lost in interest in year 1? c) How much money would the Marginal Cost be in year 1?
30. KTC Toy Co. is at present spending P400 000.00 annually for the manual operation of its assembly line. To cut costs, three proposals for automation are being considered. Proposal X has an initial equipment cost of P800 000.00, has salvage value of P75 000.00 at the end of six years and results in 65% savings per year on Operations cost. Proposal Y costs P500 000.00, has a six-year life, a salvage value of P50 000.00 and results in 50% savings per year. Proposal Z has an initial cost of P300 000.00, a life of three years with no salvage value. With this proposal, a similar replacement will be available for P350 000.00 and a 45% savings in operations is realized, Determine the best alternative using annual worth analysis and an MARR of 14%, (Ans. ATX = P63 060.83: ATY= P77 279-13; ATZ= P42 101.86; Best alternative is Proposal Y)
Consider a machine purchased one year ago for $18,000. The machine is being depreciated $3,000 per year throughout a six-year period. Its current market value is $6,000, and the expected market value of the machine one year from now is $4,000. If the interest rate is 10%, the expected cost of holding the machine during the next year is $___.
A new process for a manufacturing process will have a first cost of $45,000 with annual costs of $38,000. Extra income associated with the new process is expected to be $62,000 per year. What is the discounted payback period at i = 12% per year? 2.84 3.23 2.25 4.52
A machine having a first cost of $20,000 is expected to save $1500 in the first year of operation, and the savings should increase by $200 every year until (and including) the 9th year; thereafter, the savings will decrease by $150 until (and including) the 16th year. Using equivalent uniform annual worth, is this machine economical? Assume a MARR of 10%.
A mechanical workshop invested in purchasing a semiautomatic machine for $50,000, that expected to generate a net income of $8,000 starting year 4 and expected to decrease by 5% per year thereafter. The useful life of the machine is 20 years. If the workshop's minimum attractive rate of return (MARR) is 10% per year, the standard notation for determining the discounted payback period is: O 0 = -50,000 + 8,000 (P/A, 5%, 10%, np - 3) (P/F, 10%, 3) O 0= -50,000 + 8,000 (P/A, 5%, 10%, np) O 0 = -50,000 + 8,000 (P/A, -5%, 10%, np - 4) (P/F, 10%, 4) O 0= -50,000 + 8,000 (P/A, 5%, 10%, np - 4) (P/F, 10%, 4) O 0= -50,000 + 8,000 (P/A, -5%, 10%, np) (P/F, 10%, 4) None of them O 0 = -50,000 + 8,000 (P/A, -5%, 10%, np - 3) (P/F, 10%, 3) O 0= -50,000 + 8,000 (P/A, -59%, 10%, np) (P/F, 10%, 3)
The initial cost of one customized machine is $675,000 with an annual operating cost of $14,800, and a life of 4 years. The machine will be worthless and replaced at the end of its life. What is the equivalent annual cost of this machine if the required rate of return is 14.5 percent and we ignore taxes? USING EXCEL FORMULAS
A three-year-old small crane is being considered for early replacement. Its current market value is $17,500. Estimated future market values and annual operating costs for the next five years are given in the table below. What is the economic life for this crane if the interest rate is 5.1% per year? Year 0 Market Value Annual Operating Cost $17,500 1 $15,110 $4,700 2 $12,930 $4,809 3 $10,110 $4,883 4 $7,400 $4,997 5 $- $5,095
Answer using excel: Machine A costs $316 and produces a profit of $106 at the end of each year for 7 years, while Machine B costs $128 and produces a profit of $71 at the end of each year for 4 years. Assuming the operation continues indefinitely and the cost of capital is 13%. Calculate equivalent annual value (EAV) to determine the better option. Enter EAV for Machine A below.
Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $45,000 and a remaining useful life of five years. It can be sold now for $52,000. Variable manufacturing costs are $36,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is five years. Purchase price Variable manufacturing costs per year (a) Compute the income increase or decrease from replacing the old machine with Machine A. (b) Compute the income increase or decrease from replacing the old machine with Machine B. (c) Should Lopez keep or replace its old machine? (d) If the machine should be replaced, which new machine should Lopez purchase? Req A Complete this question by entering your answers in the tabs below. Req B Revenues Machine A: Keep or Replace Analysis Req C and D Compute the income increase or decrease from replacing the old machine with Machine A. (Amounts to be…

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