You are in the mail-order business and you are considering upgradingyour mail ordering system to make your operations more efficient and to increase sales. Thecomputerized ordering system will cost $80,000 to install and has maintenance costs $20,000each year. The system is expected to last five years with no salvage value at the end of theservice period. The new order system will save $60,000 in operating costs each year and bring inadditional sales revenue in the amount of $40,000 per year for the next five years. If your interestrate is 15%, find the present worth of the investment.A) $184,820.25B) $188,172.41C) $248,737.06D) Answers A, B and C are not correctMaintenance money for a new building at a college is being solicitedfrom potential alumni donors. You would like to make a donation to cover all future expectedmaintenance costs for the building. These maintenance costs are expected to be $50,000 eachyear for the first 25 years, $60,000 for each of years 26 through 35, and $80,000 each year afterthat. The building has an indefinite service life. If the money are placed on an account that willpay 10% interest compounded annually, how large should the donation be?A) 8516,346.42B) $514,211.37C) $526,326.07D) Answers A, B and C are not correctConsider the following two mutually exchusive projects:Year-$12,000$4,00088,000$12,000-$16,000$9,0001$8,000What value of X would make the decision maker indifferent between A and B at an interest rateof 15%?A) $11,018.26B) $10,148.69C) $12,538.18D) Answers A, B and C are not correct

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You are in the mail-order business and you are considering upgrading your mail ordering system to make your operations more efficient and to increase sales. The computerized ordering system will cost $80,000 to install and has maintenance costs $20,000 each year. The system is expected to last five years with no salvage value at the end of the service period. The new order system will save $60,000 in operating costs each year and bring in additional sales revenue in the amount of $40,000 per year for the next five years. If your interest rate is 15%, find the present worth of the investment. A) $184,820.25 B) $188,172.41 C) $248,737.06 D) Answers A, B and C are not correct

You are in the mail-order business and you are considering upgrading your mail ordering system to make your operations more efficient and to increase sales. The computerized ordering system will cost $80,000 to install and has maintenance costs $20,000 each year. The system is expected to last five years with no salvage value at the end of the service period. The new order system will save $60,000 in operating costs each year and bring in additional sales revenue in the amount of $40,000 per year for the next five years. If your interest rate is 15%, find the present worth of the investment. A) $184,820.25 B) $188,172.41 C) $248,737.06 D) Answers A, B and C are not correct

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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A drug store is looking into the possibility of installing a "24/7" automated prescription refill system to increase its projected revenues by $20,000 per year over the next 5 years. Annual expenses to maintain the system are expected to be $5,000. The system will have no market value at the end of its 5-year life, and it will be depreciated by the SL method. The store's effective income tax rate is 40%, and the after-tax MARR is 12% per year. What is the maximum amount that is justified for the purchase of this prescription refill system? (Calculate the Maximum P)
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