You are trying to pick the least-expensive car for your new delivery service. You have two choices: the Kia Rio, which will cost $14,000to purchase and which will have OCF of -$1,200 annually throughout the vehicle's expected life of three years as a delivery vehicle;and the Toyota Prius, which will cost $20,000 to purchase and which will have OCF of -$650 annually throughout that vehicle'sexpected four-year life. Both cars will be worthless at the end of their life. If you intend to replace whichever type of car you choosewith the same thing when its life runs out, again and again out into the foreseeable future.If the business has a cost of capital of 12 percent, calculate the EAC.Note: Negative amounts should be indicated by a minus sign. Do not round your intermediate calculations. Round your answers to2 decimal places.EAC RioEAC PriusWhich one should you choose?Kia Rio

1. Present Value Interest Factor of Annuity (PVIFA): . For the Kia Rio: PVIFA [Rio]…

Answered: You are trying to pick the…

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 are trying to pick the least expensive car for your new delivery service. You have two choices: the Scion xA, which will cost $13,000 to purchase and which will have OCF of −$1,200 annually throughout the vehicle's expected life of three years as a delivery vehicle; and the Toyota Prius, which will cost $23,000 to purchase and which will have OCF of −$550 annually throughout that vehicle's expected five-year life. Both cars will be worthless at the end of their life. If you intend to replace whichever type of car you choose with the same thing when its life runs out, again and again out into the foreseeable future, and if your business has a cost of capital of 12 percent, what is the difference in the EAC of the two cars?
You are trying to pick the least expensive car for your new delivery service. You have two choices: the Scion xA, which will cost $13,000 to purchase and which will
k You are trying to pick the least-expensive car for your new delivery service. You have two choices: the Kia Rio, which will cost $17,000 to purchase and which will have OCF of -$1,800 annually throughout the vehicle's expected life of three years as a delivery vehicle; and the Toyota Prius, which will cost $25,000 to purchase and which will have OCF of -$950 annually throughout that vehicle's expected 4-year life. Both cars will be worthless at the end of their life. If you intend to replace whichever type of car you choose with the same thing when its life runs out, again and again out into the foreseeable future. If the business has a cost of capital of 12 percent, calculate the EAC. Note: Negative amounts should be indicated by a minus sign. Do not round your intermediate calculations. Round your answers to 2 decimal places. EAC Rio EAC Prius Which one should you choose?
You are trying to determine whether you should purchase a new or used car. The new car costs $40,000 and will last for 25 years. The used car costs $15,000 and will last for 10 years. The new car gets 30. mpg while the used car gets 20. mpg. In either case, you drive 350 miles per week and gas costs $4.38 per gallon. You get $500 for salvaging each car at the end of its lifetime. What is the net present value of each car? Assume the interest rate is 3.0%. Please show your work.
An auto dealership is running a promotional deal whereby they will replace your tires free of charge for the life of the vehicle when you purchase your car from them. You expect the original tires to last for 30,000 miles, and then they will need replacement every 30,000 miles thereafter. Your driving mileage averages 15,000 miles per year. A set of new tires costs $400. If you trade in the car at 150,000 miles with new tires then, what is the lump-sum present value of this deal if your personal interest rate is 12% per year?
Gateway Tours is choosing between two bus models. One is more expensive to purchase and maintain, but lasts two years longer than the other. Gateway's discount rate is 9%. It plans to continue with one of the two models for the foreseeable future. Based on the equivalent annual costs of each, shown below, which should it choose? [Note: I have tried to make it easier for you to solve this problem. You do not need to do extra, unnecessary calculations merely to show me your work.] Model Old R Year 0 $0 Year 1 -$29 Year 2 -$29 Year 3 Year 4 -$29 Year 5 -$29 -$29 Year 6 -$29 S & S $0 -$27 -$27 -$27 -$27 Which bus should Gateway Tours choose, and why? because $ is better than $ Give me the name of the bus that should be chosen, and the final numbers that justify your answer. Your answer must take the form: "Choose B IUS Ix = = X₂ x² Insert Formula 14 !!! !!! H IM
Fantastic Footwear can invest in one of two different automated clicker cutters. The first, A, has a $130,000 first cost. A similar one with many extra features, B has a $471,000 first cost. A will save $50,000 per year over the cutter currently in use. B will save $160,000 per year. Each clicker cutter will last five years. If the MARR is 8 percent, which alternative is better? Use an IRR comparison. For the increment from the do-nothing alternative to cutter A, the IRR is should be chosen. (Type integers or decimals rounded to one decimal place as needed.) percent. For the increment from cutter A to cutter B, the IRR is percent. Therefore,
Fantastic Footwear can invest in one of two different automated clicker cutters. The first, A, has a $100,000 first cost. A similar one with many extra features, B has a $440,000 first cost. A will save$50,000 per year over the cutter currently in use. B will save $150,000 per year. Each clicker cutter will last five years. If the MARR is 9 percent, which alternative isbetter? Use an IRR comparison Answer the following question: For the increment from the do-nothing alternative to cutter A, the IRR is: enter your response here percent. For the increment from cutter A to cutter B, the IRR is : enter your response here percent. Therefore, neither cutter/cutter B/cutter A should be chosen.
Your company is deciding whether to purchase a high-quality printer for your office or one of lesser quality. The high-quality printer costs $45 000 and should last five years. The lesser quality printer costs $25 000 and should last two years. If the cost of capital for the company is 12 per cent, then what is the equivalent annual cost for the best choice for the company?
You own a bakery that operates 365 days per year, and want to purchase a commercial oven for $3000, which includes free delivery and installation. The manufacturer says it should last for 10 years. Operating and maintenance cost for the oven is $1400 per year. To offset these, you are estimating that you will be able to make $45 per day after eliminating cost of ingredients and other overhead. Use Present Worth method to see if you should buy the oven if your MARR is 15%.
A student is considering the purchase of two alternative cars. Car A initially costs $1,500 more than Car B, but uses 0.05 gallons per mile, versus 0.07 gallons per mile for Car B. Both cars will last for 10 years, and B’s market value is $800 less than A’s. Fuel costs $4.00 per gallon. If all else is equal, at how many miles driven per year does Car A become preferable to Car B? (a) 875 (b) 1,167 (c) 1,723 (d) 1,892
Fantastic Footwear can invest in one of two different automated clicker cutters. The first, A, has a $99,000 first cost. A similar one with many extra features, B, has a $390,000 first cost. A will save $50 000 per year over the cutter currently in use. B will save $150 000 per year. Each clicker cutter will last five years. If the MARR is 10 percent, which alternative is better? Use an IRR comparison. Question 4 options: Project A where IRR > MARR Project B where IRR > MARR Project A where IRR < MARR Project B where IRR < MARR

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