You are considering investing RM60000 in new equipment. You estimate that the net cash flows will be RM14000 during the first year, but will increase by RM2500 per year the next year and each year thereafter. The equipment is estimated to have a 12-year service life and a net salvage value of RM4600 at that time. Assume MARR of 6%. a.Calculate the annual capital cost CR (ownership cost) for the equipment. b.Determine the equivalent annual savings. c.Is this a wise investment? Y/N. Format : 2969 Format : 86072 Format : A

You are considering investing RM60000 in new equipment. You estimate that the net cash flows will be RM14000 during the first year, but will increase by RM2500 per year the next year and each year thereafter. The equipment is estimated to have a 12-year service life and a net salvage value of RM4600 at that time. Assume MARR of 6%. a.Calculate the annual capital cost CR (ownership cost) for the equipment. b.Determine the equivalent annual savings. c.Is this a wise investment? Y/N. Format : 2969 Format : 86072 Format : A

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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You must calculate the value of a container handling equipment for a terminal, which produces year end annual cash flows of $1,200 the first year, $2,000 the second year, $3,000 the third year, and $4,000 the fourth year.A) Assuming a weighted average cost of capital of 15 percent, what is the value of this equipment using the net present value (NPV) approach? B) If the cost of this equipment is $5,200 for the terminal, calculate the net present value. Would you buy this equipment for your terminal?
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