Q4. Turning 5 years ago bought a lathe for $ 7,000. The annual operating cost ofthis device is $ 3400. This machine is expected to work satisfactorily for thenext 6 years and its scrap value will be negligible after 6 years. This lathe hasthe opportunity to buy a new lathe for $ 9,500. The new machine costs $ 1,800a year, has a lifespan of 6 years, and has a scrap value of zero. The seller of thenew device buys the old device for $1,600. Which machine should he choose ifthe minimum attractive return rate of this lathe is 15%.

Th machine having less present value will be given more preference than machine having more present…

Turning 5 years ago bought a lathe for $ 7,000. The annual ope device is $ 3400. This machine is expected to work satisfactor t6 years and its scrap value will be negligible after 6 years. Th opportunity to buy a new lathe for $ 9,500. The new machine ear, has a lifespan of 6 years, and has a scrap value of zero. The device buys the old device for $1,600. Which machine shoul

Turning 5 years ago bought a lathe for $ 7,000. The annual ope device is $ 3400. This machine is expected to work satisfactor t6 years and its scrap value will be negligible after 6 years. Th opportunity to buy a new lathe for $ 9,500. The new machine ear, has a lifespan of 6 years, and has a scrap value of zero. The device buys the old device for $1,600. Which machine shoul

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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Wildhorse Inc. wants to purchase a new machine for $38,790, excluding $1,500 of installation costs. The old machine was purchased 5 years ago and had an expected economic life of 10 years with no salvage value. The old machine has a book value of $2,200, and Wildhorse Inc. expects to sell it for that amount. The new machine will decrease operating costs by $9,000 each year of its economic life. The straight-line depreciation method will be used for the new machine for a 6-year period with no salvage value. Click here to view PV table. (a) Determine the cash payback period. (Round cash payback period to 2 decimal places, e.g. 10.53.) Cash payback period (b) years Determine the approximate internal rate of return. (Round answer to O decimal places, e.g. 13%. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Internal rate of return %
A university bought computers years ago worth P10M. Its annual operating cost is P2M. If it is going to be upgraded to have a new life of 4 more years and if is sold today, its price is P5M. Its salvage value is P300,000. Alongside with this, it will buy new medium-type computer at a cost of P5M, salvage cost of P500,000 and its annual operating cost is P1M. The medium-type computers are expected to last for 5 years. This is to be considered the 1st Option. The 2nd Option is to buy larger computer, which has a cost of P7M, P750,000 salvage value, and P2M annual operating cost per year. It would last 6 years. The last option is to lease a computer. The computer has annual payment of P3,160,003 per year and initial payment of P2,393,188. It would last 6 years. Assume that the interest rate is 21% per year. What is the Annual Equivalent Cost of the Last Option?
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A company plans to buy $ 11300 worth of metering devices. The machine, which has an economic life of 12 years and will not be used afterwards, should be put into maintenance at the end of a period of 2 years in order to be able to make good measurements. First maintenance cost $ 500 And each maintenance cost is twice the previous maintenance cost. There is no scrap value at the end of the machine's economic life. The company gains varying amounts every year due to the purchase of this machine. For the first three years, the earnings are $ 1000 each year. Annual earnings for each subsequent 3-year period increase by $ 1000 over the previous 3-year period. a) Draw the cash flow diagram and find the IIR value. b) If you managed the company, would you buy this machine when the MARR was 5% and explain why.
ABC Company has purchased a new machine costing $49,000 and the machine is expected to reduce the operating expenses by $9,000 every year. The useful life of machine is 8 years and the machine is expected to have a zero-scrap value at the end of its useful life. The company's required rate of return is 12%. Calculate the Net Present Value (NPV) of the machine. (Round intermediate calculations to 3 decimal places and final answer to the nearest dollar.) a. $44,712 b. -$464 c. -$4,288 d. $4,288
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give me the right answer only ASAP Suppose we are thinking about replacing an old computer with a new one. The old one cost us $1.4 million; the new one will cost $1.7 million. The new machine will be depreciated straight-line to zero over its five-year life. It will probably be worth about $325,000 after five years. The old computer is being depreciated at a rate of $281,000 per year. It will be completely written off in three years. If we don’t replace it now, we will have to replace it in two years. We can sell it now for $450,000; in two years, it will probably be worth $130,000. The new machine will save us $315,000 per year in operating costs. The tax rate is 22 percent, and the discount rate is 12 percent. a-1. Calculate the EAC for the old and the new computer. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) a-2. What is the NPV of the decision to…
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