Your company leases cars to other companies for revenue. Youintend to invest BD13,000 this year to expand the rental carfleet. The following cars are available in the market at the timeof purchase (January 2022). Assume all cars' useful life is eightyears from the year of production. All cars were produced inJanuary. For a 10% per year MARR and the Robust method (6steps), determine:a. Which cars should be purchased based on NPV?b. The total capital needed for this investment.c. The leftover amount?d. What will you do with the leftover amount?CarYearMarket Value, Salvage Value,BDAnnual Operating Annual Revenue,Cost, BD350BDModelAltima 2021BD8,2002,6292,640BMW202015,0005,6574503,360Camry 20185,7002,3354002,160Kia Rio20205,3009433302,100Malibu20195,2006035001,680Sunny20205,9001,5473002,280

a. To determine which cars to purchase based on NPV, we need to calculate the NPV for each car and…

Answered: Your company leases cars to other…

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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Similar questions

Assume that a company is considering purchasing a machine for $50,500 that will have a five-year useful life and no salvage value. The machine will lower operating costs by $17,000 per year. The company's required rate of return is 18%. The profitability index for this investment is closest to: Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. Multiple Choice C O 0.95. 1.01. 1.05. 1.11.
A company purchase a piece of manufacturing equipment for an additional income. The expected income is $4,500 per semester. Its useful ife is 9 years. Expenses are estimated to be $500 semiannually if the purchase price is $44,000 and there is a salvage value of $4,500, what is the prospective rate of return (RR) of this investment? The MARR is 10% compounded semiannually Oa IRR-602% semiannual Oh IRR-3% semiannual ORR-12% semiannual Od IRR-6.23% semiannual
A supermarket can purchase an automated checkout machine for $100,000 (to be paid in year 0) that has an estimated life of 5 years. Servicing and maintenance over that period will begin at $2,500 per annum ( at the end of year 1) and increase at a 10% rate every year. If the checkout machine is purchased, the supermarket will not be required to hire one additional checkout operator. The checkout operator costs $28,000 per year (assume this is also at the end of each year beginning with year 1), and this amount is expected to increase at 5% annually. If the supermarket’s cost of capital is 10%, which alternative should be selected. Assume all annual cashflows occur at the end of each year.
Blackstone Company purchased a new software system costing $35,000. To finance the purchase, Blackstone signed a contract agreeing to pay the cost over the next 8 years, with a payment due every six months; the first payment will be made six months from the date of purchase. Blackstone's usual interest rate is 10%. What is the amount of the payment required (rounded to the nearest dollar)? 's usual 096, What is the amount of the Select one: O a. 16,030 O b. 6,560 O c. 3,229 d. 2,575 e. None of the above
You Answered In 2022, Leo construction will work on a residential project that lasts 4 months. The direct costs of the residential project are shown in the following bar chart. Correct Answer $160,000 Question 1 A 321.790 11 $ 1 $120,000 83.870 gi B 2 $90,000 C D 1 3 $80,000 Assuming $5.000 indirect cost per month, and 12.2% markup. If the retainage is 7% throughout the project, finance charge is 1% per month. and payments will be billed at the end of the month and will be received one month later. How much is the last payment the contractor is expected to receive? 4
A developer plans to start construction of a building in one year if at that point rent levels make construction feasible. At that time the building will cost $1,340,000 to construct. During the first year after construction would take place, there is a 60 percent chance that NOI will be $175,500 and a 40 percent chance that the NOI will be $88,600. In either case, NOI would be expected to increase at 2 percent per year after the first year. Required: How much should the developer be willing to pay for the land if he wants a 12 percent rate of return? (Round your answer to the nearest whole dollar amount.) Amount payable by developer $ 1,334,444
A commercial 3D printer is purchased for $350,000. The salvage value of the printer decreases by 30% each year that it is held. The cost to operate and maintain the machine the first year it is used is $14,000; these costs increase by $5,000 each year. What is the optimal replacement interval and minimum EUAC for the printer, assuming a MARR of 13% is used? Click here to access the TVM Factor Table Calculator. years ORI: EUAC*: $ Carry all interim calculations to 5 decimal places and then round your final answers to a whole number. The tolerance is ±5 for the EUAC*.
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LEW Company purchased a machine at a price of $100,000 by signing a note payable, which requires a single payment of $123,210 in two years. a. Assuming annual compounding of interest, what rate of interest is being paid on the loan? Use Excel function Rate to calculate the rate. b. What would be the purchase price of the machine had LEW negotiated a single payment of $120,000 in two years, using the same effective rate? Use excel only..
A fleet manager must choose between two trucks to purchase for a company's fleet. The company uses an interest rate of 6% and will keep either truck for 3 years. Truck A costs $29,000 and has a market value of $18,000 after 3 years. Truck B costs $33,000 and has a market value of $20,000 after 3 years. Determine the equivalent uniform annual cost (EUAC) for the truck the fleet manager should buy. Express your answer as a positive number is $ to the nearest $10.
A firm can lease a truck for 5 years at a cost of $49,000 annually. It can instead buy a truck at a cost of $99,000, with annual maintenance expenses of $29,000. The truck will be sold at the end of 5 years for $39,000. a. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 12%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Answer is complete but not entirely correct. Equivalent annual cost S 35,501.30x b. Which is the better option? Buy Lease
Payment amounts at the end of each of the next five years are $10,450, $8,500, $9,675, $12,500, and $11,635. Discount rate is 10.875%.We need to determine the cost in today's dollars of the equipment Saul purchased today. I really need the formulas on how you got to the answers =PV(D17,D13,-D15) I got the first on I do not understand the rest for the Present value and how the answer comes up with $38, 652.76 I have different ways and still do not understand.

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