Calculate the annual worth.

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 11, Problem 36P

(a):

To determine

Calculate the annual worth.

(a):

Expert Solution

Explanation of Solution

Defender: Upgrade cost (UC) is $79,000. Market value (MV) is $40,000. Annual operating cost (AC) is $85,000. Salvage value (SV) is $30,000. Interest rate (i) is 15%. Time period (n) is 3.

Challenger: First cost (FC) is $220,000. Annual operating cost (AC) is $45,000. Salvage value (SV) is $50,000. . Interest rate (i) is 15%. Time period (n) is 3.

Annual worth (AV) of defender can be calculated as follows:

AV=−(MV+UC)(i(1+i)n(1+i)n−1)−AC+SV(i(1+i)n−1)=−(40,000+79,000)(0.15(1+0.15)3(1+0.15)3−1)−85,000+30,000(0.15(1+0.15)3−1)=−(119,000)(0.15(1.52088)1.52088−1)−85,000+30,000(0.151.52088−1)=−(119,000)(0.228130.52088)−85,000+30,000(0.150.52088)=−(119,000)(0.43797)−85,000+30,000(0.28797)=−52,118.43−85,000+8,639.1=−128,479.33

The annual worth of the defender is -$128,479.33.

Annual worth (AV) of challenger can be calculated as follows:

AV=−FC(i(1+i)n(1+i)n−1)−AC+SV(i(1+i)n−1)=−220,000(0.15(1+0.15)3(1+0.15)3−1)−45,000+50,000(0.15(1+0.15)3−1)=−220,000(0.15(1.52088)1.52088−1)−45,000+50,000(0.151.52088−1)=−22,000(0.228130.52088)−45,000+50,000(0.150.52088)=−220,000(0.43797)−45,000+50,000(0.28797)=−96,353.4−45,000+14,398.5=126,954.9

The annual worth of the challenger is -$126,954.9.

The challenger can be replaced, if the annual cost of challenger is lower than the defender. Thus, the firm can replace the defender for the challenger.

(b):

To determine

Calculate the annual worth for the next three years.

(b):

Expert Solution

Explanation of Solution

The annual worth for the next three years is -$126,954.9, which is calculated in the subpart ‘a’.

(c):

To determine

Calculate the annual worth through spreadsheet.

(c):

Expert Solution

Explanation of Solution

The spreadsheet function to calculate the annual worth of defender through the spreadsheet is given below:

= -PMT(15%,3,-119000,30000)-85000

The above function gives the value of -$128,479.95.

The spreadsheet function to calculate the annual worth of challenger through the spreadsheet is given below:

= -PMT(15%,3,-220000,50000)-45000

The above function gives the value of -$126,956.08.

(d):

To determine

Calculate the annual worth through spreadsheet for 8 years.

(d):

Expert Solution

Explanation of Solution

The spreadsheet function to calculate the annual worth of challenger for 8 years through the spreadsheet is given below:

= -PMT(15%,8,-220000,10000)-45000

The above function gives the value of -$93,298.52. This reveals that there is a reduction of $33,657.56 per year recovery from the annual worth of the challenger with the 3 year time period.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

A linear programming computer package is needed. As part of the settlement for a class action lawsuit, Hoxworth Corporation must provide sufficient cash to make the following annual payments (in thousands of dollars). Year 1 2 3 4 5 6 Payment 170 195 220 265 295 440 The annual payments must be made at the beginning of each year. The judge will approve an amount that, along with earnings on its investment, will cover the annual payments. Investment of the funds will be limited to savings (at 4% annually) and government securities, at prices and rates currently quoted in The Wall Street Journal. Hoxworth wants to develop a plan for making the annual payments by investing in the following securities (par value = $1,000). Funds not invested in these securities will be placed in savings. Security Current Price Rate (%) Years to Maturity 1 $1,055 6.750 3 2 $1,000 5.125 4 Assume that interest is paid annually. The plan will be submitted to the judge and, if approved,…

On the 1st of April 2018, the South African National Treasury increase the value-added tax rate from 14% to 15%. This policy change had a wide-ranging impact on society. Discuss some of the benefits and drawbacks of making use of this type of tax to generate government revenue and what we may expect in terms of its impact on inflation and GDP growth within the economy. Please use some of the economics graphs to explain some scenarios

Eskom is South Africa’s monopoly power producer which the majority of South Africans depend on. Suppose there is extensive deregulation in the power industry. What is the impact of this deregulation on the industry? Help me on discussing the new market structure as well as the impact on supply and demand. Use the relevant diagrams.

Answer 2

Question

Chapter 11, Problem 36P

(a):

To determine

Calculate the annual worth.

(a):

Expert Solution

Explanation of Solution

Defender: Upgrade cost (UC) is $79,000. Market value (MV) is $40,000. Annual operating cost (AC) is $85,000. Salvage value (SV) is $30,000. Interest rate (i) is 15%. Time period (n) is 3.

Challenger: First cost (FC) is $220,000. Annual operating cost (AC) is $45,000. Salvage value (SV) is $50,000. . Interest rate (i) is 15%. Time period (n) is 3.

Annual worth (AV) of defender can be calculated as follows:

AV=−(MV+UC)(i(1+i)n(1+i)n−1)−AC+SV(i(1+i)n−1)=−(40,000+79,000)(0.15(1+0.15)3(1+0.15)3−1)−85,000+30,000(0.15(1+0.15)3−1)=−(119,000)(0.15(1.52088)1.52088−1)−85,000+30,000(0.151.52088−1)=−(119,000)(0.228130.52088)−85,000+30,000(0.150.52088)=−(119,000)(0.43797)−85,000+30,000(0.28797)=−52,118.43−85,000+8,639.1=−128,479.33

The annual worth of the defender is -$128,479.33.

Annual worth (AV) of challenger can be calculated as follows:

AV=−FC(i(1+i)n(1+i)n−1)−AC+SV(i(1+i)n−1)=−220,000(0.15(1+0.15)3(1+0.15)3−1)−45,000+50,000(0.15(1+0.15)3−1)=−220,000(0.15(1.52088)1.52088−1)−45,000+50,000(0.151.52088−1)=−22,000(0.228130.52088)−45,000+50,000(0.150.52088)=−220,000(0.43797)−45,000+50,000(0.28797)=−96,353.4−45,000+14,398.5=126,954.9

The annual worth of the challenger is -$126,954.9.

The challenger can be replaced, if the annual cost of challenger is lower than the defender. Thus, the firm can replace the defender for the challenger.

(b):

To determine

Calculate the annual worth for the next three years.

(b):

Expert Solution

Explanation of Solution

The annual worth for the next three years is -$126,954.9, which is calculated in the subpart ‘a’.

(c):

To determine

Calculate the annual worth through spreadsheet.

(c):

Expert Solution

Explanation of Solution

The spreadsheet function to calculate the annual worth of defender through the spreadsheet is given below:

= -PMT(15%,3,-119000,30000)-85000

The above function gives the value of -$128,479.95.

The spreadsheet function to calculate the annual worth of challenger through the spreadsheet is given below:

= -PMT(15%,3,-220000,50000)-45000

The above function gives the value of -$126,956.08.

(d):

To determine

Calculate the annual worth through spreadsheet for 8 years.

(d):

Expert Solution

Explanation of Solution

The spreadsheet function to calculate the annual worth of challenger for 8 years through the spreadsheet is given below:

= -PMT(15%,8,-220000,10000)-45000

The above function gives the value of -$93,298.52. This reveals that there is a reduction of $33,657.56 per year recovery from the annual worth of the challenger with the 3 year time period.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 11, Problem 36P

(a):

To determine

Calculate the annual worth.

(a):

Expert Solution

Explanation of Solution

Defender: Upgrade cost (UC) is $79,000. Market value (MV) is $40,000. Annual operating cost (AC) is $85,000. Salvage value (SV) is $30,000. Interest rate (i) is 15%. Time period (n) is 3.

Challenger: First cost (FC) is $220,000. Annual operating cost (AC) is $45,000. Salvage value (SV) is $50,000. . Interest rate (i) is 15%. Time period (n) is 3.

Annual worth (AV) of defender can be calculated as follows:

AV=−(MV+UC)(i(1+i)n(1+i)n−1)−AC+SV(i(1+i)n−1)=−(40,000+79,000)(0.15(1+0.15)3(1+0.15)3−1)−85,000+30,000(0.15(1+0.15)3−1)=−(119,000)(0.15(1.52088)1.52088−1)−85,000+30,000(0.151.52088−1)=−(119,000)(0.228130.52088)−85,000+30,000(0.150.52088)=−(119,000)(0.43797)−85,000+30,000(0.28797)=−52,118.43−85,000+8,639.1=−128,479.33

The annual worth of the defender is -$128,479.33.

Annual worth (AV) of challenger can be calculated as follows:

AV=−FC(i(1+i)n(1+i)n−1)−AC+SV(i(1+i)n−1)=−220,000(0.15(1+0.15)3(1+0.15)3−1)−45,000+50,000(0.15(1+0.15)3−1)=−220,000(0.15(1.52088)1.52088−1)−45,000+50,000(0.151.52088−1)=−22,000(0.228130.52088)−45,000+50,000(0.150.52088)=−220,000(0.43797)−45,000+50,000(0.28797)=−96,353.4−45,000+14,398.5=126,954.9

The annual worth of the challenger is -$126,954.9.

The challenger can be replaced, if the annual cost of challenger is lower than the defender. Thus, the firm can replace the defender for the challenger.

(b):

To determine

Calculate the annual worth for the next three years.

(b):

Expert Solution

Explanation of Solution

The annual worth for the next three years is -$126,954.9, which is calculated in the subpart ‘a’.

(c):

To determine

Calculate the annual worth through spreadsheet.

(c):

Expert Solution

Explanation of Solution

The spreadsheet function to calculate the annual worth of defender through the spreadsheet is given below:

= -PMT(15%,3,-119000,30000)-85000

The above function gives the value of -$128,479.95.

The spreadsheet function to calculate the annual worth of challenger through the spreadsheet is given below:

= -PMT(15%,3,-220000,50000)-45000

The above function gives the value of -$126,956.08.

(d):

To determine

Calculate the annual worth through spreadsheet for 8 years.

(d):

Expert Solution

Explanation of Solution

The spreadsheet function to calculate the annual worth of challenger for 8 years through the spreadsheet is given below:

= -PMT(15%,8,-220000,10000)-45000

The above function gives the value of -$93,298.52. This reveals that there is a reduction of $33,657.56 per year recovery from the annual worth of the challenger with the 3 year time period.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 11, Problem 36P

(a):

To determine

Calculate the annual worth.

(a):

Expert Solution

Explanation of Solution

Defender: Upgrade cost (UC) is $79,000. Market value (MV) is $40,000. Annual operating cost (AC) is $85,000. Salvage value (SV) is $30,000. Interest rate (i) is 15%. Time period (n) is 3.

Challenger: First cost (FC) is $220,000. Annual operating cost (AC) is $45,000. Salvage value (SV) is $50,000. . Interest rate (i) is 15%. Time period (n) is 3.

Annual worth (AV) of defender can be calculated as follows:

AV=−(MV+UC)(i(1+i)n(1+i)n−1)−AC+SV(i(1+i)n−1)=−(40,000+79,000)(0.15(1+0.15)3(1+0.15)3−1)−85,000+30,000(0.15(1+0.15)3−1)=−(119,000)(0.15(1.52088)1.52088−1)−85,000+30,000(0.151.52088−1)=−(119,000)(0.228130.52088)−85,000+30,000(0.150.52088)=−(119,000)(0.43797)−85,000+30,000(0.28797)=−52,118.43−85,000+8,639.1=−128,479.33

The annual worth of the defender is -$128,479.33.

Annual worth (AV) of challenger can be calculated as follows:

AV=−FC(i(1+i)n(1+i)n−1)−AC+SV(i(1+i)n−1)=−220,000(0.15(1+0.15)3(1+0.15)3−1)−45,000+50,000(0.15(1+0.15)3−1)=−220,000(0.15(1.52088)1.52088−1)−45,000+50,000(0.151.52088−1)=−22,000(0.228130.52088)−45,000+50,000(0.150.52088)=−220,000(0.43797)−45,000+50,000(0.28797)=−96,353.4−45,000+14,398.5=126,954.9

The annual worth of the challenger is -$126,954.9.

The challenger can be replaced, if the annual cost of challenger is lower than the defender. Thus, the firm can replace the defender for the challenger.

(b):

To determine

Calculate the annual worth for the next three years.

(b):

Expert Solution

Explanation of Solution

The annual worth for the next three years is -$126,954.9, which is calculated in the subpart ‘a’.

(c):

To determine

Calculate the annual worth through spreadsheet.

(c):

Expert Solution

Explanation of Solution

The spreadsheet function to calculate the annual worth of defender through the spreadsheet is given below:

= -PMT(15%,3,-119000,30000)-85000

The above function gives the value of -$128,479.95.

The spreadsheet function to calculate the annual worth of challenger through the spreadsheet is given below:

= -PMT(15%,3,-220000,50000)-45000

The above function gives the value of -$126,956.08.

(d):

To determine

Calculate the annual worth through spreadsheet for 8 years.

(d):

Expert Solution

Explanation of Solution

The spreadsheet function to calculate the annual worth of challenger for 8 years through the spreadsheet is given below:

= -PMT(15%,8,-220000,10000)-45000

The above function gives the value of -$93,298.52. This reveals that there is a reduction of $33,657.56 per year recovery from the annual worth of the challenger with the 3 year time period.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 11, Problem 36P

(a):

To determine

Calculate the annual worth.

(a):

Expert Solution

Explanation of Solution

Defender: Upgrade cost (UC) is $79,000. Market value (MV) is $40,000. Annual operating cost (AC) is $85,000. Salvage value (SV) is $30,000. Interest rate (i) is 15%. Time period (n) is 3.

Challenger: First cost (FC) is $220,000. Annual operating cost (AC) is $45,000. Salvage value (SV) is $50,000. . Interest rate (i) is 15%. Time period (n) is 3.

Annual worth (AV) of defender can be calculated as follows:

AV=−(MV+UC)(i(1+i)n(1+i)n−1)−AC+SV(i(1+i)n−1)=−(40,000+79,000)(0.15(1+0.15)3(1+0.15)3−1)−85,000+30,000(0.15(1+0.15)3−1)=−(119,000)(0.15(1.52088)1.52088−1)−85,000+30,000(0.151.52088−1)=−(119,000)(0.228130.52088)−85,000+30,000(0.150.52088)=−(119,000)(0.43797)−85,000+30,000(0.28797)=−52,118.43−85,000+8,639.1=−128,479.33

The annual worth of the defender is -$128,479.33.

Annual worth (AV) of challenger can be calculated as follows:

AV=−FC(i(1+i)n(1+i)n−1)−AC+SV(i(1+i)n−1)=−220,000(0.15(1+0.15)3(1+0.15)3−1)−45,000+50,000(0.15(1+0.15)3−1)=−220,000(0.15(1.52088)1.52088−1)−45,000+50,000(0.151.52088−1)=−22,000(0.228130.52088)−45,000+50,000(0.150.52088)=−220,000(0.43797)−45,000+50,000(0.28797)=−96,353.4−45,000+14,398.5=126,954.9

The annual worth of the challenger is -$126,954.9.

The challenger can be replaced, if the annual cost of challenger is lower than the defender. Thus, the firm can replace the defender for the challenger.

(b):

To determine

Calculate the annual worth for the next three years.

(b):

Expert Solution

Explanation of Solution

The annual worth for the next three years is -$126,954.9, which is calculated in the subpart ‘a’.

(c):

To determine

Calculate the annual worth through spreadsheet.

(c):

Expert Solution

Explanation of Solution

The spreadsheet function to calculate the annual worth of defender through the spreadsheet is given below:

= -PMT(15%,3,-119000,30000)-85000

The above function gives the value of -$128,479.95.

The spreadsheet function to calculate the annual worth of challenger through the spreadsheet is given below:

= -PMT(15%,3,-220000,50000)-45000

The above function gives the value of -$126,956.08.

(d):

To determine

Calculate the annual worth through spreadsheet for 8 years.

(d):

Expert Solution

Explanation of Solution

The spreadsheet function to calculate the annual worth of challenger for 8 years through the spreadsheet is given below:

= -PMT(15%,8,-220000,10000)-45000

The above function gives the value of -$93,298.52. This reveals that there is a reduction of $33,657.56 per year recovery from the annual worth of the challenger with the 3 year time period.

Answer 6

Chapter 11, Problem 36P

(a):

To determine

Calculate the annual worth.

(a):

Expert Solution

Explanation of Solution

Defender: Upgrade cost (UC) is $79,000. Market value (MV) is $40,000. Annual operating cost (AC) is $85,000. Salvage value (SV) is $30,000. Interest rate (i) is 15%. Time period (n) is 3.

Challenger: First cost (FC) is $220,000. Annual operating cost (AC) is $45,000. Salvage value (SV) is $50,000. . Interest rate (i) is 15%. Time period (n) is 3.

Annual worth (AV) of defender can be calculated as follows:

AV=−(MV+UC)(i(1+i)n(1+i)n−1)−AC+SV(i(1+i)n−1)=−(40,000+79,000)(0.15(1+0.15)3(1+0.15)3−1)−85,000+30,000(0.15(1+0.15)3−1)=−(119,000)(0.15(1.52088)1.52088−1)−85,000+30,000(0.151.52088−1)=−(119,000)(0.228130.52088)−85,000+30,000(0.150.52088)=−(119,000)(0.43797)−85,000+30,000(0.28797)=−52,118.43−85,000+8,639.1=−128,479.33

The annual worth of the defender is -$128,479.33.

Annual worth (AV) of challenger can be calculated as follows:

AV=−FC(i(1+i)n(1+i)n−1)−AC+SV(i(1+i)n−1)=−220,000(0.15(1+0.15)3(1+0.15)3−1)−45,000+50,000(0.15(1+0.15)3−1)=−220,000(0.15(1.52088)1.52088−1)−45,000+50,000(0.151.52088−1)=−22,000(0.228130.52088)−45,000+50,000(0.150.52088)=−220,000(0.43797)−45,000+50,000(0.28797)=−96,353.4−45,000+14,398.5=126,954.9

The annual worth of the challenger is -$126,954.9.

The challenger can be replaced, if the annual cost of challenger is lower than the defender. Thus, the firm can replace the defender for the challenger.

Answer 7

Chapter 11, Problem 36P

(a):

To determine

Calculate the annual worth.

Answer 8

(a):

Expert Solution

Explanation of Solution

Defender: Upgrade cost (UC) is $79,000. Market value (MV) is $40,000. Annual operating cost (AC) is $85,000. Salvage value (SV) is $30,000. Interest rate (i) is 15%. Time period (n) is 3.

Challenger: First cost (FC) is $220,000. Annual operating cost (AC) is $45,000. Salvage value (SV) is $50,000. . Interest rate (i) is 15%. Time period (n) is 3.

Annual worth (AV) of defender can be calculated as follows:

AV=−(MV+UC)(i(1+i)n(1+i)n−1)−AC+SV(i(1+i)n−1)=−(40,000+79,000)(0.15(1+0.15)3(1+0.15)3−1)−85,000+30,000(0.15(1+0.15)3−1)=−(119,000)(0.15(1.52088)1.52088−1)−85,000+30,000(0.151.52088−1)=−(119,000)(0.228130.52088)−85,000+30,000(0.150.52088)=−(119,000)(0.43797)−85,000+30,000(0.28797)=−52,118.43−85,000+8,639.1=−128,479.33

The annual worth of the defender is -$128,479.33.

Annual worth (AV) of challenger can be calculated as follows:

AV=−FC(i(1+i)n(1+i)n−1)−AC+SV(i(1+i)n−1)=−220,000(0.15(1+0.15)3(1+0.15)3−1)−45,000+50,000(0.15(1+0.15)3−1)=−220,000(0.15(1.52088)1.52088−1)−45,000+50,000(0.151.52088−1)=−22,000(0.228130.52088)−45,000+50,000(0.150.52088)=−220,000(0.43797)−45,000+50,000(0.28797)=−96,353.4−45,000+14,398.5=126,954.9

The annual worth of the challenger is -$126,954.9.

The challenger can be replaced, if the annual cost of challenger is lower than the defender. Thus, the firm can replace the defender for the challenger.

Answer 9

(a):

Expert Solution

Answer 10

(a):

Expert Solution

Answer 11

Expert Solution

Answer 12

(b):

To determine

Calculate the annual worth for the next three years.

(b):

Expert Solution

Explanation of Solution

The annual worth for the next three years is -$126,954.9, which is calculated in the subpart ‘a’.

Answer 13

(b):

To determine

Calculate the annual worth for the next three years.

Answer 14

(b):

Expert Solution

Explanation of Solution

The annual worth for the next three years is -$126,954.9, which is calculated in the subpart ‘a’.

Answer 15

(b):

Expert Solution

Answer 16

(b):

Expert Solution

Answer 17

Expert Solution

Answer 18

(c):

To determine

Calculate the annual worth through spreadsheet.

(c):

Expert Solution

Explanation of Solution

The spreadsheet function to calculate the annual worth of defender through the spreadsheet is given below:

= -PMT(15%,3,-119000,30000)-85000

The above function gives the value of -$128,479.95.

The spreadsheet function to calculate the annual worth of challenger through the spreadsheet is given below:

= -PMT(15%,3,-220000,50000)-45000

The above function gives the value of -$126,956.08.

Answer 19

(c):

To determine

Calculate the annual worth through spreadsheet.

Answer 20

(c):

Expert Solution

Explanation of Solution

The spreadsheet function to calculate the annual worth of defender through the spreadsheet is given below:

= -PMT(15%,3,-119000,30000)-85000

The above function gives the value of -$128,479.95.

The spreadsheet function to calculate the annual worth of challenger through the spreadsheet is given below:

= -PMT(15%,3,-220000,50000)-45000

The above function gives the value of -$126,956.08.

Answer 21

(c):

Expert Solution

Answer 22

(c):

Expert Solution

Answer 23

Expert Solution

Answer 24

(d):

To determine

Calculate the annual worth through spreadsheet for 8 years.

(d):

Expert Solution

Explanation of Solution

The spreadsheet function to calculate the annual worth of challenger for 8 years through the spreadsheet is given below:

= -PMT(15%,8,-220000,10000)-45000

The above function gives the value of -$93,298.52. This reveals that there is a reduction of $33,657.56 per year recovery from the annual worth of the challenger with the 3 year time period.

Answer 25

(d):

To determine

Calculate the annual worth through spreadsheet for 8 years.

Answer 26

(d):

Expert Solution

Explanation of Solution

The spreadsheet function to calculate the annual worth of challenger for 8 years through the spreadsheet is given below:

= -PMT(15%,8,-220000,10000)-45000

The above function gives the value of -$93,298.52. This reveals that there is a reduction of $33,657.56 per year recovery from the annual worth of the challenger with the 3 year time period.