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 $45,200 and $45,500 b) Between $38,700 and $40,000 c) Between $25,200 and $25,500

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 $45,200 and $45,500 b) Between $38,700 and $40,000 c) Between $25,200 and $25,500

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
a company must buy new safety equipment every 8 years, costing $16,000, with a salvage value of $185O. A new type of equipment is coming on the market soon that will last 10 years and have a salvage value of 12% of the original cost. If money is worth 14.5% annually, compare the two possibilities and identify the highest price the company should pay for the new type of equipment.
Give typing answer with explanation and conclusion A new production system for a factory is to be purchased and installed for $154982. This system will save approximately 300,000 kWh of electric power each year for a 6-year period. Assume the cost of electricity is $0.10 per kWh, and factory MARR is 15% per year, and the salvage value of the system will be $9668 at year 6. Using the PW method to analyzes if this investment is economically justified A- calculate the PW of the above investment and insert the result below.
Do not use Excel.
A manufacturing company plans to buy a new piece of equipment for $70,000 which is expected to last 10 years and will have a salvage value of $10,000. The new equipment will require an overhaul at the end of year 5 at a cost of $21,000. If purchased, the new equipment will allow the company to generate new revenues of $12,000 at the end of each year. The company uses an interest rate of 8%. What is the Present Worth of the project?
‏You are the owner of a building materials outlet, and you are considering adding a garden supplies section to your store. The cost of the expansion will be $1.5 million, to be depreciated over its 4-year life, using straight line depreciation to an expected salvage value of $500,000 at the end of the 4th year. To finance this investment, you will borrow $800,000 using a four- year balloon-payment bank loan (only interest paid for 4 years, the principal due at the end of the 4th year) with an interest rate of 10%. The garden supplies are expected to generate revenues of $650,000 in the 1st year, $ 700,000 in the 2nd year, $750,000 in the 3rd and 4th years. The expenses of operating the garden supplies section are expected to be 40% of revenues each year and the tax rate is 40%. Working capital requirements are expected to be 10% of revenues (made at the beginning of each period, but not debt financed beyond the initial $800,000 loan). Your cost of equity is 13%, and your cost of…
Consider a machine that costs $1000 to purchase. The machine creates an annual operating expense of $500 at the end of first year, which is going to increase by $50 in each year thereafter. The salvage value of this machine is $200, independent of the usage period. Find the economic life of this machine under nominal MARR 25%, compounding annually. A 8. B. 6.
in a replacement analysis, the following is known about the challenger: the initial investment is $8000, there is no annual maintenance for the first three years, maintenance each year in years four and five is $2000, then $4500 in year six, and invreasinh by $2500 each year thereafter. the salvage value is $0 at all times and the MARR is 12% per year. the economic life of the challeneger is how many years?
A company can rent a machine for an all- inclusive rate of $125 per hour and on average makes use of such a machine for 1600 hours per year. The company is considering purchasing a machine as an alternative to rent and obtains the information given below: Cost of machine = $320,000 Salvage value after 5 years = $120,000 Annual insurance premiums = $3,000 Annual tax = $1,80 Fuel cost per hour = $50 Oil and grease cost = 10% of fuel cost Annual maintenance = $15,000 Discount Rate = 18% If the planning horizon is 5 years, determine whether the company should purchase a new machine or continue to rent?
A construction company is evaluating two options for an elevator, each of which has a useful life in 10 years. Option 1 costs $45, 000 to install and $2700 annually, with a salvage value of $ 3000 in year 10. Option 1 also requires a significant overhaul in year 6 with a cost of $8, 000. Option 2 costs $54, 000, costs $2, 800 annually, and has a salvage value of $5000 in year 10. Annual interest is 4%, compounded monthly. Which option would you choose? Show your work.
Baird Rentals can purchase a van that costs $110,000; it has an expected useful life of five years and no salvage value. Baird uses straight-line depreciation. Expected revenue is $40,425 per year. Assume that depreciation is the only expense associated with this Investment. Required a. Determine the payback period. Note: Round your answer to 1 decimal place. b. Determine the unadjusted rate of return based on the average cost of the investment. Note: Round your answer to 1 decimal place. (l.e., .234 should be entered as 23.4). a. Payback period b. Unadjusted rate of return years %
A furnace has an initial investment of $ 58,000 AND a recovery value after 7 years of 12.5% of your initial investment. The depreciation method to use is the double declining balance method. What will the depreciation charge be each year?

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