What would it cost an insurance company to replace a family's personal property that originally cost $18,000? The replacement costs for the items have increased 15 percent.
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- 3. Determining replacement cost. What would it cost an insurance company to replace a family's personal property that originally cost $42,000? The replacement cost for the items have increased 15%. Please show answer, explanation, and formulaYou have a homeowner's policy with $120,000 coverage, a $1,000 deductible, and required coverage of 80 percent of the replacement cost. Their home recently suffered extensive fire damage in the amount of $92,000. Assuming the replacement value of the home was $160,000, how much will the insurance company pay on this loss? O $73,600 $68,000 $86,250 $85,300 $92,000Eddie’s Precision Machine Shop is insured for $700,000. The present yearly insurance premium is $1.00 per $100 of coverage. A sprinkler system with an estimated life of 20 years and no salvage value can be installed for $20,000. Annual maintenance costs for the sprinkler system are $400. If the sprinkler system is installed, the system must be included in the shop’s value for insurance purposes, but the insurance premium will reduce to $0.40 per $100 of coverage. Eddie uses a MARR of 15 %/year. Solve, a. What is the present worth of this investment? b. What is the decision rule for judging the attractiveness of investments based on present worth? c. Is the sprinkler system economically justified?
- An insurance company is considering providing fire insurance for $120,000, $100,000, or $80,000 to the owner of a house with a market value of $100,000. a) How much insurance is the company likely to sell for the house? Why? b) If the probability of a fire is 1 in 1000, what would be the premium charged by the company?Big Sky Hospital plans to obtain a new MRI that costs $1.5 million and has an estimated four-year useful life. It can obtain a bank loan for the entire amount and buy the MRI or it can lease the equipment. Assume that the following facts apply to the decision: - The MRI falls into the three-year class for tax depreciation, so the MACRS allowances are 0.33, 0.45,0.15, and 0.07 in Years 1 through 4, respectively. - Estimated maintenance expenses are $75,000 payable at the beginning of each year whether the MRI is leased or purchased. - Big Sky's marginal tax rate is 40 percent. - Big Sky's cost of debt is 15 percent. - If leased, the lease (rental) payments would be $400,000 payable at the end of each of the next four years. - The estimated residual (and salvage) value is $250,000. What is the IRR of the leaseMandren Inc. has a fire insurance policy from the Blundi Insurance Company with a 90% coinsurance clause based on replacement cost. The replacement cost of the building is $600,000. The face amount of the policy Mandren purchases is $400,000. If a covered loss in the amount of $550,000 occurs, how much will Mandren collect from their insurer?
- A homeowner remodeled their kitchen in November 2018. The remodel project included purchasing a high-end residential grade dishwasher with a 10 year useful life expectancy that cost $10,000. The current replacement cost of the dishwasher is $15,000. Breaking news: Last night a fire destroyed the dishwasher. If the homeowner maintains Property coverage on an actual cash value (ACV) basis, how much would they recover from their insurer for the dishwasher? $5,000 $10,000 O $7,500 O $15,000please help meYou own a house that you rent for $1,200 a month. The maintenance expenses on the house average $200 a month. The house cost $89,000 when you purchased it several years ago. A recent appraisal on the house valued it at $120,000. The annual property taxes are $5,000. If you sell the house you will incur $25,000 in expenses. You are deciding whether to sell the house or convert it for your own use as a professional office. What value should you place on this house when analyzing the option of using it as a professional office?
- Can you answer this general accounting question?A hospital wants to purchase a diagnostic system for $500,000 and depreciate it on a straight-line basis over a five year period for tax purposes. The investment would result in revenues of $225,000 per year, before taxes in Year 1, and increase at 3% for five years. At the end of five years, it is estimated that the system can be sold for $75,000. The gain on the sale would be taxable at the 40% corporate rate. The system also would require hiring two FTE techs to operate it, payable at a rate of $41,700 each per year and increase at a rate of 5% per year. Supply costs are expected to be $ 25,000 per year based on expected utilization and these costs are expected to increase at a rate of 4.2%. Miscellaneous overhead and other associated expenses are expected to be $10,000 per year and increase at a rate of 2% per year. Questions: Is the investment in the machine attractive in economic terms, given the projected cash flows? Please assume that the cash flows occur at the end of each…A holiday trailer depreciates in value between 10% to 15% per year. If your family purchases a holiday trailer for $29,000.00 and they plan on selling it in 4 year, what is the most that they could expect to sell it for if these depreciation percentages are correct?
