Your father wants to restore a '68 Chevelle. However, he is unsure if it is worth thework.He can pull a 350-small block engine from the junk yard at S400 and will onlyneed $200 in parts to get it running.A remanufactured transmission is $1,250 from a local parts store.He will do the interior (dash and seats) himself with $300 in materials.He plans $950 in tires, brakes, and suspension parts.The paint job will cost $650.He figures he can resell it at $40,000.The car is currently posted on an auto trader site for $25,000.1. What is the ROI (write as a percentage)?2. Is it a good idea (Yes or No, based on ROI)?

An investment in a job or an activity involves many types of expenses, from purchasing the material…

Your father wants to restore a '68 Chevelle. However, he is unsure if it is worth the work. He can pull a 350-small block engine from the junk yard at 400 and will only need $200 in parts to get it running. A remanufactured transmission is $1,250 from a local parts store. He will do the interior (dash and seats) himself with S300 in materials. He plans $950 in tires, brakes, and suspension parts. The paint job will cost $650. He figures he can resell it at $40,000. The car is currently posted on an auto trader site for $25,000. 1. What is the ROI (write as a percentage)? 2. Is it a good idea (Yes or No, based on ROI)?

Your father wants to restore a '68 Chevelle. However, he is unsure if it is worth the work. He can pull a 350-small block engine from the junk yard at 400 and will only need $200 in parts to get it running. A remanufactured transmission is $1,250 from a local parts store. He will do the interior (dash and seats) himself with S300 in materials. He plans $950 in tires, brakes, and suspension parts. The paint job will cost $650. He figures he can resell it at $40,000. The car is currently posted on an auto trader site for $25,000. 1. What is the ROI (write as a percentage)? 2. Is it a good idea (Yes or No, based on ROI)?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Mr. Gallagher is considering replacing his five-year-old car with a new one. The new car will cost $30,000, taking into consideration the trade-in value of the old car. The new car will save Mr. Gallagher $5,000 per year in terms of gasoline, repairs, and maintenance. Mr. Gallagher plans to keep this new car for five years. At the end of five years, the car can be sold for $8,000. What is the internal rate of return on the new car? Select one: a. 1.40% b. 2.80% c. 5.00% d. 8.14% e. 9.43%
A mechanical engineer who designs and sells equipment that automates manual labor processes is offering a machine/robot combination that will significantly reduce labor costs associated with manufacturing garage-door opener transmitters. The equipment has a first cost of $170,000, an estimated annual operating cost of $54,000, a maximum useful life of 5 years, and a $20,000 salvage value anytime it is replaced. The existing equipment was purchased 12 years ago for $65,000 and has an annual operating cost of $78,000. At most, the currently owned equipment can be used 2 more years, at which time it will be auctioned off for an expected amount of $6000, less 33% paid to the company handling the auction. The same scenario will occur if the currently owned equipment is replaced now. Determine the defender and challenger estimates of P, n, S, and AOC in conducting a replacement analysis today at an interest rate of 20% per year.
Bill just returned from a duck hunting trip with eight ducks. Bill's friend, John, disapproves of duck hunting, and to discourage Bill from further hunting, John presented him with the following cost estimate per duck: Camper and equipment: Cost, $20,000; usable for eight seasons; 14 hunting trips per season Travel expense (pickup truck): 100 miles at $0.45 per mile (gas, oil, and tires-$0.28 per mile; depreciation and insurance -$0.17 per mile) Shotgun shells (two boxes per hunting trip) Boat: Cost, $2,320, usable for eight seasons; 14 hunting trips per season Hunting license: Cost, $70 for the season; 14 hunting trips per season Money lost playing poker: Loss, $34 (Bill plays poker every weekend whether he goes hunting or stays at home) Bottle of whiskey: Cost, $10 per hunting trip (used to ward off the cold) Total cost Cost per duck ($329 ÷ 8 ducks) Required: $ 179 55 45 35 21: in 34 10 $ 329 $ 41 1. Assuming the duck hunting trip Bill just completed is typical, what costs are…
Ruth just graduated from college. Since she is starting her own business, it's time to upgrade from her clunker to a reliable vehicle. Ruth has the option to purchase a new car for her business at a cost of $21,528 (life of 7 years with no salvage value), estimating that it would help her bring in additional annual net operating cash flows of $10,400 over the life of the car. Determine the simple payback period and the IRR for this investment. Ruth expects her business income to be subject to a 30% tax rate. (Round simple payback perlod to 3 decimal places, eg. 15.256 and IRR to 2 decimal places, eg. 15.25%. Round Intermediate calculations to 2 decimal places, eg. 15.25) Simple payback period IRR years. %
I like driving small cars and I buy nearly identical ones whenever the old one needs replacing. Typically, I trade in my old car for a new one costing about $20000. Standard maintenance and repair costs are expected to be $500 in the first year (at the end of the year), $750 in the second year, increasing by $500 per year thereafter. Assume interest is 8% and straight line depreciation with a salvage value for the vehicle of $4000 after four years. a. What year would you replace the car? Enter The year number (1,2,3,or 4). EAC EAC EAC Year Salvage Maintenance Capital Maintenance Total XXXXXX XXXXXXX XXXXXXXXXXXXX XXXXXXXXXXXXXX XXXXXXXXX $20,000 1 3 4
Signal mistakenly produced 1,025 defective cell phones. The phones cost $67 each to produce. A salvage company will buy the defective phones as they are for $30 each. It would cost Signal $84 per phone to rework the phones. If the phones are reworked. Signal could sell them for $144 each. Signal has excess capacity. Should Signal scrap or rework the phones? Sales Rework costs Income Scrap Rework
A careful buyer is deciding whether to buy artificial Christmas trees or continue cutting down trees. The artificial tree costs him $34 and he can use it for 8 years after which it is thrown away as garbage. The other alternative is to continue cutting trees at a cost of $8 today, $9 next year, $10 the next year and so on during those same 8 years. If he buys the artificial tree, what is the return on investment?
You just bought a new luxury sports car for $125,000. Before you had time to get insurance, the car was wrecked. Weird Wally offers to take it off your hands for $10,000. You can then purchase a similar model for $128,000. A body-shop (with an excellent reputation) offers to rebuild the wrecked car for $90,000 and loan you a similar model while the vehicle is being rebuilt. Once rebuilt, the body-shop claims, it will "run like a new car and nobody will be able to tell the difference." What is the preferred course of action, from a financial point of view?
Management of Plascencia Corporation is considering whether to purchase a new model 370 machine costing $502,000 or a new model 220 machine costing $443,000 to replace a machine that was purchased 11 years ago for $470,000. The old machine was used to make product I43L until it broke down last week. Unfortunately, the old machine cannot be repaired.Management has decided to buy the new model 220 machine. It has less capacity than the new model 370 machine, but its capacity is sufficient to continue making product I43L.Management also considered, but rejected, the alternative of simply dropping product I43L. If that were done, instead of investing $443,000 in the new machine, the money could be invested in a project that would return a total of $487,000.In making the decision to buy the model 220 machine rather than the model 370 machine, the differential cost was: A: 59,000 B: 27,000 C: 32,000 D: 17,000
Management of Plascencia Corporation is considering whether to purchase a new model 370 machine costing $511,000 or a new model 220 machine costing $471,000 to replace a machine that was purchased 7 years ago for $503,000. The old machine was used to make product I43L until it broke down last week. Unfortunately, the old machine cannot be repaired. Management has decided to buy the new model 220 machine. It has less capacity than the new model 370 machine, but its capacity is sufficient to continue making product I43L. Management also considered, but rejected, the alternative of simply dropping product I43L. If that were done, instead of investing $471,000 in the new machine, the money could be invested in a project that would return a total of $479,000. In making the decision to invest in the model 220 machine, the opportunity cost was: Multiple Choice $503,000 $471,000 $511,000 $479,000
Rakesh
Carla Vista Roofing is faced with a decision. The company relies very heavily on the use of its 60-foot extension lift for work on large homes and commercial properties. Last year, Carla Vista Roofing spent $77,400 refurbishing the lift. It has just determined that another $45,500 of repair work is required. Alternatively, it has found a newer used lift that is for sale for $194,000. The company estimates that both lifts would have useful lives of 5 years. The new lift is more efficient and thus would reduce operating expenses from $110,000 to $84,200 each year. Carla Vista Roofing could also rent out the new lift for about $11,500 per year. The old lift is not suitable for rental. The old lift.could currently be sold for $28,500 if the new lift is purchased. The new lift and old lift are estimated to have salvage values of zero if used for another 5 years. Prepare an incremental analysis showing whether the company should repair or replace the equipment. (Enter negative amounts using…