The Lift Operations Manager at the Blue Mountain Ski Resort in Collingwood, ON has decided to carry out an an determine when the chairlift up to their Black Diamond run should be replaced. The existing chairlift was purcha years ago for $715 000. The costs of operating and maintaining this lift for a 5-year study period are predicted to 000 in year 1 and increasing by $1 300 each year after. Blue Mountain Ski Resort uses a MARR of 10% for lift ope projects. All calculations should be to the nearest dollar. a) Assume the chairlift loses value following a declining-balance depreciation model with a depreciation rat Calculate the salvage value for now (year=0) and each of the next 5 years. Find the economic life of the existing chairlift. What is EAC*? b) c) The Lift Operation Manager has done some market research for possible replacement alternatives. The r this research are outlined in the following table. The economic lives of the alternative replacements as w EAC for each, assuming they are kept for the duration of their economic lives, are represented. Assuming replacement of the chairlift by the best challenger which is the best replacement option and when shoul

The Lift Operations Manager at the Blue Mountain Ski Resort in Collingwood, ON has decided to carry out an an determine when the chairlift up to their Black Diamond run should be replaced. The existing chairlift was purcha years ago for $715 000. The costs of operating and maintaining this lift for a 5-year study period are predicted to 000 in year 1 and increasing by $1 300 each year after. Blue Mountain Ski Resort uses a MARR of 10% for lift ope projects. All calculations should be to the nearest dollar. a) Assume the chairlift loses value following a declining-balance depreciation model with a depreciation rat Calculate the salvage value for now (year=0) and each of the next 5 years. Find the economic life of the existing chairlift. What is EAC*? b) c) The Lift Operation Manager has done some market research for possible replacement alternatives. The r this research are outlined in the following table. The economic lives of the alternative replacements as w EAC for each, assuming they are kept for the duration of their economic lives, are represented. Assuming replacement of the chairlift by the best challenger which is the best replacement option and when shoul

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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National Chemicals has an automatic chemical mixer that it has been using for the past 4 years. The mixer originally cost $18,000. Today the mixer can be sold for $10,000. The mixer can be used for 10 years more and will have a $2,500 salvage value at that time. The annual operating and maintenance costs for the mixer equal $6,000/year. Because of an increase in business, a new mixer must be purchased. If the old mixer is retained, a new mixer will be purchased at a cost of $25,000 and have a $4,000 salvage value in 10 years. This new mixer will have annual operating and maintenance costs equal to $5,000/year. The old mixer can be sold and a new mixer of larger capacity purchased for $32,000. This mixer will have a $6,000 salvage value in 10 years and will have annual operating and maintenance costs equal to $8,000/year. Based on a MARR of 15% and using an EUAC cash flow approach, what do you recommend?
The Ocean City water park is considering the purchase of a new log flume ride. The cost to purchase the equipment is $8,000,000, and it will cost an additional $475,000 to have it installed. The equipment has an expected life of 6 years, and it will be depreciated using a MACRS 7-year class life. Management expects to run about 150 rides per day, with each ride averaging 35 riders. The season will last for 120 days per year. In the first year, the ticket price per rider is expected to be $5.25, and it will be increased by 4% per year. The variable cost per rider will be $1.65, and total fixed costs will be $525,000 per year. After six years, the ride will be dismantled at a cost of $245,000 and the parts will be sold for $600,000. The cost of capital is 8.5%, and its marginal tax rate is 25%. Using Goal Seek, calculate the minimum ticket price that must be charged in the first year in order to make the project acceptable.
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Grouper Growth Farms, a farming cooperative, is considering purchasing a tractor for $559,050. The machine has a 10-year life and an estimated salvage value of $43,000. Delivery costs and set-up charges will be $12,800 and $410, respectively. Grouper Growth uses straight-line depreciation and has a required rate of return of 9%. Grouper Growth estimates that the tractor will be used five times a week with the average charge to the individual farmers of $410. Fuel is $55 for each use of the tractor. The present value of an annuity of 1 for 10 years at 9% is 6.41766. Click here to view PV tables. For the new tractor, compute the: (a) Your answer has been saved. See score details after the due date. Cash payback period. (Round answer to 1 decimal places, e.g. 15.2.) Cash payback period (b) Net present value Net present value. (Round factor values to 5 decimal places, e.g. 15.11212. Round Intermediate calculations and final answer to O decimal places, e.g. 5,275.) Save for Later 6.2 $…
Sheep Ranch Golf Academy is evaluating new golf practice equipment. The "Dimple- Max" equipment costs $110,000, has a 4-year life, and costs $9,100 per year to operate. The relevant discount rate is 12 percent. Assume that the straight-line depreciation method is used and that the equipment is fully depreciated to zero. Furthermore, assume the equipment has a salvage value of $8,300 at the end of the project's life. The relevant tax rate is 24 percent. All cash flows occur at the end of the year. What is the equivalent annual cost (EAC) of this equipment? (A negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) EAC
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Tanaka Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $395,000 is estimated to result in $151,000 in annual pretax cost savings. The press falls in the 5-year MACRS class, and it will have a salvage value at the end of the project of $51,000. The press also requires an initial investment in spare parts inventory of $22,000, along with an additional $3,200 in inventory for each succeeding year of the project. The shop’s tax rate is 22 percent and its discount rate is 9 percent. (MACRS schedule) Calculate the NPV of this project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Crazy Burger Shop has the following investment opportunity: Burger machinery at t=0 costs $6,000. The cost of making burgers is $2,000 per year at t=1, t=2, and t=3. The burger machinery is depreciated using the straight-line method to $1,500 over 3 years. The market value of the burger machinery after three years is $2,600. Estimated annual sales are $4,500 per year at t=1, t=2, and t=3. The required return is 15%. The tax rate is 18%. Assume no working capital requirements. What is the NPV of this project? A. $259.97 B. $1,006.62 C. $876.44 D. $-702.92
A commercial 3D printer is purchased for $350,000. The salvage value of the printer decreases by 30% each year that it is held. The cost to operate and maintain the machine the first year it is used is $14,000; these costs increase by $5,000 each year. What is the optimal replacement interval and minimum EUAC for the printer, assuming a MARR of 13% is used? Click here to access the TVM Factor Table Calculator. years ORI: EUAC*: $ Carry all interim calculations to 5 decimal places and then round your final answers to a whole number. The tolerance is ±5 for the EUAC*.
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