A university student painter is considering the purchase of a new air compressor and paint gun to replace an old paint sprayer. (Both items belong to Class 9 and have a 25% CCA rate) These two new items cost $12,000 and have a useful life of four years, at which time they can be sold for $1,600. The old paint sprayer can be sold now for $500 and could be scrapped for $250 in four years. The entrepreneurial student believes that operating revenues wiill increase annually by $8,000. The tax rate is 22% and the required rate of return is 15% What is the NPV of the new equipment? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) NPV $ Should the purchase be made? O Yes O No

A university student painter is considering the purchase of a new air compressor and paint gun to replace an old paint sprayer. (Both items belong to Class 9 and have a 25% CCA rate) These two new items cost $12,000 and have a useful life of four years, at which time they can be sold for $1,600. The old paint sprayer can be sold now for $500 and could be scrapped for $250 in four years. The entrepreneurial student believes that operating revenues wiill increase annually by $8,000. The tax rate is 22% and the required rate of return is 15% What is the NPV of the new equipment? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) NPV $ Should the purchase be made? O Yes O No

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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A university student painter is considering the purchase of a new air compressor and paint gun to replace an old paint sprayer. (Both items belong to Class 9 and have a 25% CCA rate.) These two new items cost $13,000 and have a useful life of four years, at which time they can be sold for $2,600. The old paint sprayer can be sold now for $600 and could be scrapped for $350 in four years. The entrepreneurial student believes that operating revenues will increase annually by $9000. The tax rate is 22% and the required rate of return is 15%. What is the NPV of the new equipment? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) NPV
A university student painter is considering the purchase of a new air compressor and paint gun to replace an old paint sprayer. (Both items belong to Class 9 and have a 25% CCA rate.) These two new items cost $13,500 and have a useful life of four years, at which time they can be sold for $3,100. The old paint sprayer can be sold now for $650 and could be scrapped for $400 in four years. The entrepreneurial student believes that operating revenues will increase annually by $9,500. The tax rate is 22% and the required rate of return is 15%. What is the NPV of the new equipment? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) NPV $ Should the purchase be made? multiple choice Yes No
A university student painter is considering the purchase of a new air compressor and paint gun to replace an old paint sprayer. (Both items belong to Class 9 and have a 25% CCA rate). These two new items cost $12,000 and have a useful life of four years, at which time they can be sold for $1,600. The old paint sprayer can be sold for $500 and could be scrapped for $250 in four years. The student believes that operating revenues will increase annually by $8,000. Should the purchase be made? The tax rate is 22% and the required rate of return is 15%.. please Show me the steps don't copy from cheggs .
A university student painter is considering the purchase of a new air compressor and paint gun to replace an old paint sprayer (Both items belong to Class 9 and have a 25% CCA rate.) These two new items cost $13,000 and have a useful life of four years, at which time they can be sold for $2.600 The old paint sprayer can be sold now for $600 and could be scrapped for $350 in four years. The entrepreneurial student believes that operating revenues will increase annually by $9,000. The tax rate is 22% and the required rate of return is 15% What is the NPV of the new equipment? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) NPV Should the purchase be made? ⒸYes O No
Clown Corp. is considering selling its old popcorn machine and replacing it with a newer one. The old machine has a book value of $5,000 and its remaining useful life is 5 years. Annual costs are $4,000. A high school is willing to buy it for $2,000. New equipment would cost $18,000 with annual operating costs of $1,500. The new machine has an estimated useful life of 5 years. Should the old machine be replaced? a) Please type the appropriate answer in each available space of the "Differential Analysis" table below. Alternative 1 Alternative 2 Differential Effect Revenue 24 2$ $1 Costs: Purchase Price $ $ Variable Costs $4 24 Income/(Loss) $ $4 24 b) Decision: Should the old machine be replaced? Type "Replace" or "Do not replace")
Zoysia University must purchase mowers for its landscape department. The university can buy five EVF mowers that cost $8,500 each and have annual, year-end maintenance costs of $1,850 per mower. The EVF mowers will be replaced at the end of Year 5 and have no value at that time. Alternatively, Zoysia can buy seven AEH mowers to accomplish the same work. The AEH mowers will be replaced after seven years. They each cost $7,500 and have annual, year-end maintenance costs of $1,925 per mower. Each AEH mower will have a resale value of $700 at the end of seven years. The university’s opportunity cost of funds for this type of investment is 9 percent. Because the university is a nonprofit institution, it does not pay taxes. It is anticipated that whichever manufacturer is chosen now will be the supplier of future mowers. What is the EAC of each type of mower?
A local waste management company needs to purchase a new garbage truck. The company has two truck models under consideration. The purchase price for Model A is $90, 000. The maintenance and operation costs are $10,000/year. Model B is less expensive to acquire ($60,000 at purchase), but costs more on operation and maintenance. Details of the costs are shown in the table below. Interest rate is 4%. Please help this company to decide which truck they should purchase. Year Model A Truck Model B Truck Purchase Price (beginning of year) $90,000 $60,000 Annual Operation and Maintenance (end of year) 1 $10,000 $20,000 2 $10,000 $20,000 3 $10,000 $20,000 4 $10,000 $20,000 Calculate the present values of total costs for Model A Truck and Model B Truck, respectively. (Interest rate: 4%) *Results round to the nearest 2 decimal places. (Note: you may consider using an Excel…
Zoysia University must purchase mowers for its landscape department. The university can buy eight EVF mowers that cost $7,700 each and have annual, year-end maintenance costs of $1,635 per mower. The EVF mowers will be replaced at the end of Year 4 and have no value at that time. Alternatively, Zoysia can buy ten AEH mowers to accomplish the same work. The AEH mowers will be replaced after eight years. They each cost $6,700 and have annual, year-end maintenance costs of $1,925 per mower. Each AEH mower will have a resale value of $700 at the end of eight years. The university’s opportunity cost of funds for this type of investment is 8 percent. Because the university is a nonprofit institution, it does not pay taxes. It is anticipated that whichever manufacturer is chosen now will be the supplier of future mowers. What is the EAC of each type of mower? Note: Your answers should be a negative value and indicated by a minus sign. Do not round intermediate calculations and round your…
Zoysia University must purchase mowers for its landscape department. The university can buy six EVF mowers that cost $7,600 each and have annual, year-end maintenance costs of $1,725 per mower. The EVF mowers will be replaced at the end of Year 4 and have no value at that time. Alternatively, Zoysia can buy eight AEH mowers to accomplish the same work. The AEH mowers will be replaced after seven years. They each cost $6,600 and have annual, year-end maintenance costs of $1,725 per mower. Each AEH mower will have a resale value of $800 at the end of seven years. The university’s opportunity cost of funds for this type of investment is 9 percent. Because the university is a nonprofit institution, it does not pay taxes. It is anticipated that whichever manufacturer is chosen now will be the supplier of future mowers. What is the EAC of each type of mower? (Your answers should be a negative value and indicated by a minus sign. Do not round intermediate calculations and round your answers…
St. Anthony’s College is considering the replacement analysis of a concrete mixer. The old mixer has annual operating and maintenance costs of P35,000/yr. It can be kept for 5 years more. The old mixer can be sold to the manufacturer of the new mixer for P15,000. The new mixer will have a purchase price of P45,000 and it will have a value of P10,000 in five years’ time; and it will have annual operating and maintenance costs of P20,000/yr. If money is worth 15%, would you recommend for the replacement of the old concrete mixer?
A local sanitation authority needs to purchase a new garbage truck. The authority has two truck models under consideration. The purchase price for Model A is $90, 000. The maintenance and operation costs are $10,000/year. Model B is less expensive to acquire ($60,000 at purchase), but costs more on operation and maintenance. Details of the costs are shown in the table below. Interest rate is 4%. Please help this authority to decide which truck they should purchase. Year Model A Truck Model B Truck Purchase Price (beginning of year) $90,000 $60,000 Annual Operation and Maintenance (end of year) 1 $10,000 $20,000 2 $10,000 $20,000 3 $10,000 $20,000 4 $10,000 $20,000 Calculate the present values of total costs for Model A Truck and Model B Truck, respectively. (Interest rate: 4%) (2’) Present value of Model A Truck total costs: Present value of Model B Truck total costs: Which truck model should this authority choose? Why? (1’)
A local sanitation authority needs to purchase a new garbage truck. The authority has two truck models under consideration. The purchase price for Model A is $90, 000. The maintenance and operation costs are $10,000/year. Model B is less expensive to acquire ($60,000 at purchase), but costs more on operation and maintenance. Details of the costs are shown in the table below. Interest rate is 4%. Please help this authority to decide which truck they should purchase. Year Model A Truck Model B Truck Purchase Price (beginning of year) $90,000 $60,000 Annual Operation and Maintenance (end of year) 1 $10,000 $20,000 2 $10,000 $20,000 3 $10,000 $20,000 4 $10,000 $20,000 The authority charges garbage collection fees from local residents. The estimated fee collection is $38,000 per year. Compare the present value of total costs of the truck model you choose and the present value of total revenues. Calculate the present value of total…

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