You are evaluating two different cookie - baking ovens. The Pillsbury 707costs $57,500, has a 5-year life, and has an annual OCF (after-tax) of -S10, 100 per year. The Keebler CookieMunster costs $90, 500, has a 7-yearlife, and has an annual OCF (after-tax) of -$8, 100 per year.If your discount rate is 11 percent, what is each machine's EAC? (Negativeamounts should be indicated by a minus sign. Round your answers to 2decimal places.)

Step 1: Calculate the Present Value (PV) of the costs for each oven.Pillsbury 707:PV = Initial Cost…

Answered: You are evaluating two different cookie…

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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Suppose that you are thinking about buying a car and have narrowed down your choices to two options. The new-car option: The new car costs $26,000 and can be financed with a four-year loan at 7.75%. The used-car option: A three-year old model of the same car costs $16,000 and can be financed with a four-year loan at 5.28%. What is the difference in monthly payments between financing the new car and financing the used car? (Round to the nearest cent as needed.)
Max the mouse needs to buy a refrigerator to hold all his cheese (a really big refrigerator). The refrigeratorMax wants requires a down payment of $2000. The refrigerator is purchased on time, with Max planning to pay$2000 at the end of one year and $4000 at the end of 4 years. What is the cash price of the refrigerator if theinterest rate is 10% compounded monthly? TVM FORMULA
You see a TV for $1899 and the sign says 30% off. You also have a coupon for 20% off the sale price of any TV. The sales clerk says with that coupon you get a total of 50% off. Explain if she is correct. Be sure to include the cumulative percent decrease and the sale price for the TV is. The tax is 7.35%. what will the TV cost after tax?
Your bakery can produce 3,000 unit of bagel per week for 48 weeks of operation per year. You aim to stay in this business for five years. You can either make the dough for the bagels in house or buy them from a different source. If you make the dough in house, you face with annual labour costs: $30,000, annual safety regulation costs: $5,000 and annual material costs: $20,000. But, if you choose to buy the dough from a different source, you must have a special dough-mixer machine to make adjustment for your production. Therefore, you need to pay $5,000 for the dough mixer machine, which has $1,000 salvage value at the end of 5 years. Furthermore, you face with annual maintaining costs including labour costs: $20,000 and additional overhead costs: $10,000 Using this information, find the unit cost of buy the bagel option with MARR 20%. Question 4 options: a) Between $0.70 and $0.80 b) None of the answers are correct…
Jeff & Bezos is a fresh groceries delivery company. The company has access to borrowing funds at a pre-tax rate of 8 % per year. Jeff & Bezos pays income taxes using 24 % tax rate. The company would like to start using high-speed low-altitude drones to deliver grocery purchases directly to residential customers' backyards. By doing so, the company would be saving $3.2 million pre-tax every single year. Jeff & Bezos is contemplating leasing the drones for a lease term that matches the drones' economic life. It would lease them from a different company, Nets & Flicks, that currently owns the required number of the drones. Doing that would have an estimated pre-tax annual cost of $2,130,000. Nets & Flicks' requirement is that the lease payments are made by Jeff & Bezos at the beginning of each year. Instead of leasing the fleet of the drones, Jeff & Bezos is also contemplating buying them, which would cost the company $9.9 million. If the company chooses to buy them, the drones would be…
You are graduating soon and would like to start your own business manufacturing wine coolers. You collect the following information on the initial costs: Cost of Plant and Equipment = $500,000 Licensing and Legal Costs = $50,000 You can already claim an investment tax credit of 10% on plant and equipment, and the licensing and legal costs have already been incurred. You estimate that you can sell 1 million bottles a year at $1 a bottle. You estimate your costs as follows: Variable costs/bottle = $ 50 cents Fixed costs/year = $200,000 Assume that you had borrowed 60% of your initial investment in the previous question, using a five-year term loan, with an interest rate of 7.5%. Estimate the cash flows to equity on this project.
Your factory has been offered a contract to produce a part for a new printer. The contract would last for three years, and your cash flows from the contract would be $5.17 million per year. Your upfront setup costs to be ready to produce the part would be $8.17 million. Your discount rate for this contract is 8.3% a. What does the NPV rule say you should do? b. If you take the contract, what will be the change in the value of your firm?
You are in the process of getting a new car but are not sure if you should buy or lease. The total cost of the car is $21,000, and you have a $275 monthly spend budget for payments. If you lease the car, the terms of the lease will be forty-eight months at an APR of 2.25%. The residual value of the car is $8,000. If you buy the car, a bank will offer an APR of 2.70% and seven years to repay the loan. You are not required to make a down payment with either the lease or loan options, and payments are made at the end of the month for both options. Should you lease or buy the car given your budget limit of $275 a month? Create a new workbook that shows the difference between leasing and buying the car in terms of monthly payments.
The cost to operate a clothes dryer for a year is $80.25. If the rate for electrical energy is 8.8¢/kWh, and the clothes dryer is used for 700 hours in a year, what is the power rating of the clothes dryer? Explain in depth and clearly.

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