The replacement of a planning machine is being considered by the Reardom Furniture Company. (There is an indefinite future need for this type of machine.) The best challenger will c0st $30.000 for installation and will have an estimated economic life of 12 years and a $2.000 MV at that time. It is estimated that an expenses will average $16,000 per year. The defender has a present BV of $6.000 and a present MV of $4000. Data for the defender for the next three years are given below. Using a before-tax interest rate of 15% per year, make a comparison to determine whether it is economical to make the replacement now. Year MV at End of BV at End of Expenses during the Year $20.000 25.000 30.000 Year $3.000 2.500 2.000 Year $4.500 2. 3. 3,000 1,500 O Click the icon to view the interest and annuity table for discrete compounding when i 15% per year. Fill in the table for the EUAC values for the defender for years 1-3. (Round to the nearest dollar.) Year EUAC 2 3
The replacement of a planning machine is being considered by the Reardom Furniture Company. (There is an indefinite future need for this type of machine.) The best challenger will c0st $30.000 for installation and will have an estimated economic life of 12 years and a $2.000 MV at that time. It is estimated that an expenses will average $16,000 per year. The defender has a present BV of $6.000 and a present MV of $4000. Data for the defender for the next three years are given below. Using a before-tax interest rate of 15% per year, make a comparison to determine whether it is economical to make the replacement now. Year MV at End of BV at End of Expenses during the Year $20.000 25.000 30.000 Year $3.000 2.500 2.000 Year $4.500 2. 3. 3,000 1,500 O Click the icon to view the interest and annuity table for discrete compounding when i 15% per year. Fill in the table for the EUAC values for the defender for years 1-3. (Round to the nearest dollar.) Year EUAC 2 3
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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All is calculated i need only last EUAC calculation
Transcribed Image Text:The replacement of a planning machine is being considered by the Reardom Furniture Company. (There is an indefinite future need for this type of machine.) The best challenger will cost $30,000 for installation and will have an estimated economic life of 12 years and a $2,000 MV at that time. It is estimated that annual
expenses will average $16,000 per year. The defender has a present BV of $6,000 and a present MV of $4000. Data for the defender for the next three years are given below. Using a before-tax interest rate of 15% per year, make a comparison to determine whether it is economical to make the replacement now.
Year MV at End of BV at End of Expenses during
Year
Year
the Year
1
$3,000
$4,500
$20.000
2
2.500
3,000
25.000
3
2,000
1,500
30,000
Click the icon to view the interest and annuity table for discrete compounding when i= 15% per year.
Fill in the table for the EUAC values for the defender for years 1-3. (Round to the nearest dollar.)
Year
EUAC
1
2
3
Transcribed Image Text:1
3
Expenses for the
20000
25000
30000
year
PVIF at 12%
0.8928
0.7972
0.7118
PV of expenses
17856
19930
21354
Cumulative PV of
17856
37786
59140
expenses
ΕΟΥ MV
3000
2500
2000
PV of MV
2678
1993
1423.6
Total PW
19178
39793
61716.4
(4000+Cum PV of
expenses - PV of
MV)
P/A
0.893
1.690
2.402
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