13. An aircraft push truck costs $2,000,000 with an annual operating and maintenance (O&M) cost of $30,000. If the service life of the elevator is 20 years and minimum acceptable rate of return (i) is 10%, then its present worth (cost) will be: a. 2,030,000 b. 2,255,407 c. 2,445,200 d. 2,600,000

13. An aircraft push truck costs $2,000,000 with an annual operating and maintenance (O&M) cost of $30,000. If the service life of the elevator is 20 years and minimum acceptable rate of return (i) is 10%, then its present worth (cost) will be: a. 2,030,000 b. 2,255,407 c. 2,445,200 d. 2,600,000

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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Question

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13.
An aircraft push truck costs $2,000,000 with an annual operating and maintenance
(O&M) cost of $30,000. If the service life of the elevator is 20 years and minimum
acceptable rate of return (i) is 10%, then its present worth (cost) will be:
a. 2,030,000
b. 2,255,407
c. 2,445,200
d. 2,600,000

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30. KTC Toy Co. is at present spending P400 000.00 annually for the manual operation of its assembly line. To cut costs, three proposals for automation are being considered. Proposal X has an initial equipment cost of P800 000.00, has salvage value of P75 000.00 at the end of six years and results in 65% savings per year on Operations cost. Proposal Y costs P500 000.00, has a six-year life, a salvage value of P50 000.00 and results in 50% savings per year. Proposal Z has an initial cost of P300 000.00, a life of three years with no salvage value. With this proposal, a similar replacement will be available for P350 000.00 and a 45% savings in operations is realized, Determine the best alternative using annual worth analysis and an MARR of 14%, (Ans. ATX = P63 060.83: ATY= P77 279-13; ATZ= P42 101.86; Best alternative is Proposal Y)
(a) Kiwk Berhad projects unit sales for a new fitness equipment as follows: Year 1 2 3 Unit Sales 4,200 3,500 4,000 The estimated selling price of the fitness equipment is RM1,200 per unit. The variable costs are RM800 per unit while the fixed costs are RM500,000 per year. The project requires an initial investment of RM650,000 in assets, and it will be depreciated using the reducing balance method of 40% per year. In Year 3, these assets can be sold for 20 percent of their acquisition cost. The company will also incur repair and maintenance costs of RM100,000 per year for these assets. Production of the fitness equipment will require investment in net working capital of RM130,000. However, only RM30,000 of the net working capital will be recovered when the project ends. The tax rate is 25 percent, and the required rate of retum is 12 percent. Required: (i) Compute the net cash flows of this project for Year 0 to Year 3. (ii) Calculate the net present value for this project. (iii)…
Required Investment = $80,000. Project life = 2 years. Salvage value =$30,000. CCA rate = 20% declining balance and 50% rule applies. Annual revenues = $90,000 and annual O&M costs = $20,000. Marginal tax rate = 30%. Assume all the values provided here are in constant dollars, similar to how it's done on slide 38 of Ch.14. Find the net present worth of the project. The MARR' = 10% and inflation rate =6%. The NPW is within $50 of which of the following: 40,042 40,142 40,242 40,342 40,442 None of the above
5
6. A company is considering two alternatives for manufacturing a certain part. Method R will have a first cost of $40,000, and annual operating cost of $25,000, and a $10,000 salvage value after its five-year life. Method S will have an initial cost of $100,00, an annual operating cost of $15,000 and a $12,000 salvage value after its 10-year life. At an interest rate of 12% per yr, the present worth values of the alternatives are closest to;
21. Consider a project that costs $250 now and is expected to generate $98 in net revenues at the end of each of the next three years. If the MARR is 5%, the future worth of this project is __________. A. $18.24 B. $19.54 C. $22.33 D. $18.29 23. Machine X has an initial cost of $12,000 and annual maintenance of $700 per year. It has a useful life of four years and no salvage value at the end of that time. Machine Y costs $22,000 initially and has no maintenance costs during the first year. Maintenance is $200 at the end of the second year and increases by $200 per year thereafter. Machine Y has a useful life of eight years and an anticipated salvage value of $5,000 at the end of its useful life. If the MARR is 6%, what is the approximate Net Present Worth (NPW) of machine X? A. -$28,563 B. -$25,852 C. -$32,085 D. -$22,318
5. The Akana Company expects to sell 3,000 units, ± 15 percent, of a new product. The variable cost per unit is $8, ± 5 percent, and the annual fixed costs are $12,500, ± 5 percent. The annual depreciation expense is $4,000 and the sale price is $18 per unit, ± 2 percent. The project requires $24,000 of fixed assets which will be worthless when the project ends in six years. Also required is $6,500 of net working capital for the life of the project. The tax rate is 21 percent and the required rate of return is 12 percent. What is the net present value of the optimistic, best, and pessimistic cases using scenario analysis?
A 150.
pm.3
3. A project requires an initial investment of $1,000,000 and generates annual income of $300,000 for the next 4 years with a salvage value of $200,000. At MARR of 10% determine if this is a good investment. Use MACRS with the depreciation life of 3 years. Effective tax rate is 40%. Use PW.
3. Your company has been presented with an opportunity to invest in a project. The facts on the project are presented below: The project is expected to operate as shown for ten years. If management expects to make 15% on its investments before taxes, would you recommend this project? Solve the Problem using Present Worth Method. * Investment Required Salvage Value after 10 Years Gross Income Annual Operating Costs: Php 50,000,000 Php 18,000,000 Labor Php 2,500,000 Php 1,000,000 Php 1,000,000 Php 500,000 Materials, Licenses, Insurance, etc* Fuel and Other Costs Maintenance Costs
what is the NPV of the new construction equipment? Initial cost = $100k, Salvage Value in 6 yrs = $25K, Increase Yearly Net Sales = $25k, Bank Rate = 10%

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