You invested on a special pizza oven for $150,000. This commercial oven is depreciated over a 7-year period, and it is expected to have a $20,000 estimated market value at the end of the 7 years. Using the straight-line method, what is the book value in year 5? O a) Between $31,900 and $32,300 O b) Between $45,500 and $45,900 c) Between $33,000 and $33,400 O d) None of the answers are correct O e) Between $58,300 and $58,700 f) Between $56,900 and $57,300

You invested on a special pizza oven for $150,000. This commercial oven is depreciated over a 7-year period, and it is expected to have a $20,000 estimated market value at the end of the 7 years. Using the straight-line method, what is the book value in year 5? O a) Between $31,900 and $32,300 O b) Between $45,500 and $45,900 c) Between $33,000 and $33,400 O d) None of the answers are correct O e) Between $58,300 and $58,700 f) Between $56,900 and $57,300

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 invested on a special pizza oven for $250,000. This commercial oven is depreciated over a 6-year period, and it is expected to have a $4,000 estimated market value at the end of the 6 years. Using the SOYD method, what is the book value in year 4? a) Between $35,200 and $35,500 O b) Between $28,700 and $29,000 c) None of the answers are correct d) Between $45,200 and $45,50O e) Between $25,200 and $25,500 f) Between $38,700 and $40,000
Your company is contemplating replacing some current machinery with more energy efficient models. You will be replacing the fully-depreciated machinery, which you could probably use two more years if you chose not to replace it. You expect the current machinery will have no value in two years. The new machinery will cost $150,000, and can be depreciated using 3-year MACRS class life. Expected yearly before-tax savings due to acquiring the new machinery amounts to about $45,000. At the end of three years, the new machinery is expected to be sold for $30,000. The cost of capital is 8 percent and the tax rate is 21 percent. Prepare a schedule of project cash flows by year. Clearly label the rows showing EBIT, OCF and Free (Total) Cash Flows. Compute the project's NPV and IRR. Do you recommend accepting or rejecting the project?
Blossom Company has identified that the cost of a new computer will be $50000, but with the use of the new computer, net income will increase by $7000 a year. If depreciation expense is $3000 a year, the cash payback period is: 5.0 years. 7.1 years. 16.7 years. 12.5 years.
A piece of equipment has a first cost of $75000, a maximum useful life of 4 years, and a market (salvage) value described by the relation Sk = 60000 – 10500k, where k is the number of years since it was purchased. The AOC series is estimated using AOC = 30000 + 4500k. The interest rate is 9% per year. When should the company replace this asset?
A laboratory might buy a new piece of equipment for $26,785. The equipment's useful life is 4 years, and its salvage value is $5000. The company will save $9000 per year for 4 years if it buys the equipment. Maintenance costs in year 1 will be zero, but will increase each year starting in year 2 by $500 per year (the first year is covered by a warranty). Determine the Equivalent Annual Worth if the company's cost of money is 10%.
In your company-owned business, you are contemplating to purchase a new machine for $100,000 that will produce a net revenue , after deducting operating expenses, of $10,000 per year. If you are planning to keep the machine running for 4 years, what must the market or resale value be at the end of 4 years to justify the investment? It is a must that you make a 15% annual return on your investment.
A construction company can purchase a used backhoe for $90,000 and spend $450 per day in operating costs. The equipment will have a 5 -year life then sell it at salvage for $3,000. Alternatively, the company can lease the equipment for $800 per day. How many days per year must the company use the equipment in order to justify its purchase at an interest rate of 6% per year.
Gardner Denver Company is considering the purchase of a new piece of factory equipment that will cost $360,500 and will generate $100,000 per year for 5 years. Calculate the IRR for this piece of equipment. (Click here to see present value and future value tables) fill in the blank 1%
Suppose you inherit $100,000 at age 25 and immediately invested in a growth fund who’s annual rate of return average is 13%. Five years later, you transfer all proceeds from the scrubs fun into a long-term IRA that pays an average annual rate of 8%. Immediately you start making additional contributions of $7000 per year to the same IRA. Assuming continuous interest, steady interest rates, and a perfect record of making annualcontributions, how much is this IRA worth when you reach the age of 65? The formula that will need to be used is A = P e^r*t + D/r (e^r*t - 1). Hint: use the continuous interest formula to find the accumulated amount for the first five years, which is then the annual investment, P, into the IRA.
A new forklift truck will require an investment of $30,000 and is expected to have year-end MVs and annual expenses as shown in columns 2 and 5, respectively, of the shown Table . If the before-tax MARR is 10% per year, how long should the asset be retained in service? Solve by hand and by spreadsheet. By how much would the MARR have to change before the economic life decreases by one year? How about to increase the economic life by one year?
Which of the following is TRUE? An American call option on a stock should never be exercised early O An American call option on a stock should not be exercised early when no dividends are expected O It can be optimal to exercise early an American call option on a stock when no dividends are expected and there is no liquidity or portfolio rebalancing need. O An American call option on a stock should be exercised early when no dividends are expected
Your organization is planning to purchase a new office building four years from now. The building will cost $8,000,000, have a useful life of 30 years, and have no salvage value. If your organization currently has put aside $1,500,000 in an investment account with an annual interest rate of 4.8%, how much additional money must your organization deposit into the account each month in order to be able to purchase the building in four years? (select one)

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