This asset is similar across otherasset replacement questions: Anasset has a first cost of $70,000. Inthe first year the asset loses $20,000in value, and then falls in value by20% per year thereafter. Operatingand Maintenance costs are $20,000in the first year and increases by$5000 per year each year goingforward. MARR = 10%.Find the EAC for N=5. The answer iswithin $500 of which of thefollowing?

Present value=future value/(1+r)^n

Answered: This asset is similar across other…

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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Imagine you have purchased an equipment today for P price. After N years of service you put it on Kijiji to be taken for free. Basedon this scenario, which depreciation model shows 100% depreciation in the first year of the service life of this equipment?Double Declining BalanceSOYDDeclining Balance150% Declining BalanceNone of the given answer
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The effective age of our subject is 10 years with a depreciation of 9%. The comparable has an effective age of 12 years with a depreciation of 11%. Calculate the AGE ADJUSTMENT if the cost as new for the comparable isestimated at $230,000. The lifespan of subject property aand comparable is 50 years.
The following present value factors are provided for use in this problem. Periods Present Valueof $1 at 11% Present Value of anAnnuity of $1 at 11% 1 0.9009 0.9009 2 0.8116 1.7125 3 0.7312 2.4437 4 0.6587 3.1024 Cliff Co. wants to purchase a machine for $62,000, but needs to earn a return of 11%. The expected year-end net cash flows are $24,000 in each of the first three years, and $28,000 in the fourth year. What is the machine's net present value? Multiple Choice $(3,351). $15,093. $77,093. $(43,556). $100,000.
VMIC Corp. has asked you to look at the following data. The interest rate is 10%. (a) What is the new asset’s minimum cost life? (b) When, if at all, should we replace the existing asset with the new asset?
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Assume a situation in which a company has an existing asset, A, that has a current net book value (original cost less accumulated depreciation to date) of $300,000. This asset has a useful life of 3 additional years. Its estimated disposal (sales) value both today and at the end of 3 years is zero. Asset B, which would replace A, could be purchased today for $600,000. If purchased, B would generate annual (cash) operating cost savings (pretax) of $280,000 for each year of its 3-year useful life. In determining depreciation deductions for tax purposes, assume the straight-line method and zero salvage value for both assets. The company is subject to a combined (federal, state, and local) income tax of 40%, both for operating income and gains/losses related to the sale of assets. Other than the initial outlay for asset B, assume that all cash flows (and related tax payments) occur at the end of the year. Assume a weighted-average cost of capital of 10%. (Use Table 1 and Table 2.) (Do not…
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G
Consider a project with the following information: Initial fixed asset investment = $550,000; straight-line depreciation to zero over the 4-year life; zero salvage value; price $54; variable costs = $35; fixed costs = $228,000, quantity sold = 116,000 units; tax rate = 23 percent. How sensitive is OCF to changes in quantity sold? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) AOCFIAQ 9.24

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This asset is similar across other asset replacement questions: An asset has a first cost of $70,000. In the first year the asset loses $20,000 n value, and then falls in value by orthorcaft fto