7. Seri Kayangan Local City Council intends to buy a garbage truck to replace the broken old truck. There are two alternatives that is mutually exclusive for the garbage truck and the details information regarding this are shown in the table below: Alternative X Alternative Y 60,000 1,500 Cost and Sales Items Initial Cost, RM Operation and Maintenance Cost per month, RM Repair cost for every 2 years, RM Repair cost for every 4 years, RM Salvage value, RM Lifespan, Year 9,500 1,700 5,000 7,000 10,000 7,000 (i) Do the evaluation on both alternatives using Present Worth (PW) method. Assume the interest for the loan is 12% compounded every month. (ii) Determine which alternative is the best alternative to be selected.

7. Seri Kayangan Local City Council intends to buy a garbage truck to replace the broken old truck. There are two alternatives that is mutually exclusive for the garbage truck and the details information regarding this are shown in the table below: Alternative X Alternative Y 60,000 1,500 Cost and Sales Items Initial Cost, RM Operation and Maintenance Cost per month, RM Repair cost for every 2 years, RM Repair cost for every 4 years, RM Salvage value, RM Lifespan, Year 9,500 1,700 5,000 7,000 10,000 7,000 (i) Do the evaluation on both alternatives using Present Worth (PW) method. Assume the interest for the loan is 12% compounded every month. (ii) Determine which alternative is the best alternative to be selected.

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

See similar textbooks

Similar questions

A small town is considering two potential alternatives for a garbage collection system. The following cost data has been compiled. If the interest rate is 7%, Using the conventional B/C ratio, what is the ratio and which alternative should be chosen? Salvage value is considered an offset to the original cost. System A System B Year O, first cost 350,000 250,000 Annual savings 32,000 22,000 Salvage value 50,000 40,000 LIfe 30 30
Company C is seeking for help to decide this option to choose to upgrade their current bottleneck equipment. There are two vendors and one rental option. The cost details are shown in the table below. Vender R 75000 28000 Option Initial Cost Annual Operation Cost Salvage Value 0 Estimated Life in Year 2 MARR = 10% per year compounded monthly. Vender T 125000 12000 30000 3 Rental 0 52000 0 Maximum 3 years 1. Select from the two sales vendors using the LCM and PW analysis. 2. Determine which of the three options is cheaper over a 3 year study period.
The Bureau of Public Highways is considering two possible types of road surfacing with cost estimates per kilometer as follows: Турe A Туре В First Cost P500k P650k Resurfacing period 8 years 12 years Resurfacing Cost P200k P250k Average annual maintenance cost P15k P20k The periodic resurfacing do not include the base of the subgrade. Compare these types by calculating the present worth for 24 year service, with no salvage value at the end of this time using interest rate of 10%. What is the Present Worth of Alternative B?
JADO Mfg. is trying to decide which one of two machines to purchase. Machine A costs $398,000, has a 5-year life and requires $113,000 in pretax annual operating costs. Machine B costs $510,000, has a 4-year life and requires $67,000 in pretax annual operating costs. Either machine will be depreciated using the straight-line method to zero over its life. Neither machine will have any salvage value. Whichever machine is selected, it will never be replaced. The discount rate is 12 percent and the tax rate is 34 percent. Which machine should be purchased and why? Group of answer choices Machine A because its NPV is about $61,927 higher than Machine B's NPV Machine A because its EAC is about $38,319 higher than Machine B's EAC Machine A because its EAC is about $89.989 lower than Machine B's EAC Machine B because its NPV is about $56,642 higher than Machine A's NPV Machine B because its NPV is about $45,880 higher than Machine A's NPV
A solid-waste recycling plant is considering two types of storage bins using an MARR of 10% per year. (a) Use ROR evaluation to determine which should be selected. (b) Confirm the selection using the regular AW method at MARR = 10% per year. Storage Bin P Q First cost, $ −18,000 −35,000 AOC, $ per year −4000 −3600 Salvage value, $ 1000 2700 Life, years 3 6
In trying to decide whether or not to replace a sorting/baling machine in a solid waste recycling operation, an engineer calculated the annual worthvalues for the in-place machine and a challenger. On the basis of these costs, the defender should be replaced:a. now.b. 1 year from now.c. 2 years from now.d. 3 years from now.
A city has purchased a new asphalt paving machine for $300,000.The city comptroller states that the machine will be depreciatedusing a stright line method. At the end of 8 years, the machinewill be sold with an expected salvage value of 60,000.a. Determine the function V = f(t) which expresses the bookvalue of the machine V as a function of its age t.b. What is the book value expected to be when the machine is 6years old?
TO REMEDY THE TRAFFIC SITUATION AT A BUSY INTERSECTION IN QUEZON CITY, TWO PLANS ARE BEINGCONSIDERED:PLAN AIS TO BUILD A COMPLETE CLOVER-LEAF COSTING P 9,200,000.00 WHICH WOULD PROVIDE FOR ALL NEEDSDURING THE NEXT 30 YEARS. MAINTENANCE COSTS ARE ESTIMATED TO BE P 2,000.00 A MONTH FOR THE FIRST15 YEARS AND P 3,500.00 A MONTH FOR THE SECOND 15 YEARS.PLAN BIS TO BUILD A PARTIAL CLOVER-LEAF AT A COST OF P 6,500,000.00 WHICH WOULD BE SUFFICIENT FOR THENEXT 15 YEARS. AT THE END OF 15 YEARS, THE CLOVER-LEAF WILL BE COMPLETED AT AN ESTIMATED COSTOF P 7,500,000.00. MAINTENANCE WOULD COST P 1,400.00 A MONTH DURING THE FIRST 15 YEARS AND P 3,500.00A MONTH FOR THE SECOND 15 YEARS.IF MONEY IS WORTH 8%, WHICH OF THE TWO PLANS WOULD YOU RECOMMEND? USE PRESENT WORTH OFCOST METHOD.
Garbage collection in the city are collected by garbage trucks which are operated by private contractor to ensure effective service to the public. One garbage truck will cost P3M with an annual maintenance cost of P50,000. The life of the truck is 5 years with a salvage value of P180,000. The contractor can hire a similar truck for P3400 a day. If money is worth 10% annually, how many days per year must the truck be used to warrant the purchase of the machine assuming it is used everyday for the whole year? Select the correct response: 158 221 239 200
A single-family home was developed five years ago in Neighborhood X and the owner would like to estimate the value of the property. Due to the lack of comparables in the local market, the owner relies on the cost approach for valuation. Based on the information below, what is the estimated value of the property based on the cost approach? (choose the closest answer) • The living area costs $300,000 to replace as new (material cost and labor cost) . Cost of garage and patio adds up to $50,000 • Physical depreciation is 10 percent of the replacement cost • There is no functional or external obsolescence . The land value is $200,000 and site improvement is worth 50,000 350,000 540,000 565,000 600,000 k
Peyton Manufacturing is trying to decide between two different conveyor belt systems. System A costs $260,000, has a four-year life, and requires $80,000 in pretax annual operating costs. System B costs $366,000, has a six-year life, and requires $74,000 in pretax annual operating costs. Both systems are to be depreciated straight-line to zero over their lives and will have zero salvage value. Whichever system is chosen, it will not be replaced when it wears out. The tax rate is 25 percent and the discount rate is 9 percent. Calculate the NPV for both conveyor belt systems. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g.. 32.16.) System A System B Which conveyor belt system should the firm choose? O System A O System B 4
Home work: The city council of arson, Michigan is debating whether to buy a new fire truck to increase protection for the city. The financial analyst has prepared the following data: Truck A Truck B $60,000 First cost Annual Maintenance $50,000 5,000 4,000 Useful Life 7 years 6,000 7 years 6,000 Salvage value Annual Reduction in fire damage 20,000 21,000 Using the modified B/C ratio method determine whether the city should buy a new truck, and which one to buy if it will be paid for with money borrowed at an interest rate 7%.

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS