9) An investor wants to invest in the trucking business. To run this business, 10 trucks should be acquired. The market price of a truck is $50 000. It is also necessary to pay $390 000 per year as wages to the truck drivers. Vehicle repair and maintenance costs are $10 000 per year. What is the annual worth of the project's costs at 5% MARR over a 10-year period? A) $400 000 B) $406 475 C) $454 750 D) $464 750 E) $551 800

9) An investor wants to invest in the trucking business. To run this business, 10 trucks should be acquired. The market price of a truck is $50 000. It is also necessary to pay $390 000 per year as wages to the truck drivers. Vehicle repair and maintenance costs are $10 000 per year. What is the annual worth of the project's costs at 5% MARR over a 10-year period? A) $400 000 B) $406 475 C) $454 750 D) $464 750 E) $551 800

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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Similar questions

Suppose you are in business and you buy a new machine for $40,000. After paying all other expenses, $7,000 is left that can be attributed to the pro. ductivity of the machine, which only has a one-year useful life. What is the rate of interest earned by this machine? If you had to pay 20 percent to borrow the money to buy such a machine, would you do so? Would you borrow the money at 10 percent?
Carica Company wants to purchase a new finishing machine for its paint plant. The investment is expected to generate annual cash inflows of $150,000. The required rate of return is 12% and the current machine is expected to last for four years. Required: What is the maximum dollar amount Carica Company would be willing to spend for the machine, assuming its life is also four years? Income taxes are not considered. a. $360,300 b. $395,870 c. $263,500 d. $455,550
Consider a machine that costs $1000 to purchase. The machine creates an annual operating expense of $500 at the end of first year, which is going to increase by $50 in each year thereafter. The salvage value of this machine is $200, independent of the usage period. Find the economic life of this machine under nominal MARR 25%, compounding annually. A 8. B. 6.
4.-DO IT IN EXCEL, AND SHOW THE FORMULASIf the company purchases the machine, its cost of $276,000 will be financed with a loan at 14.8% interest for three years requiring equal annual payments including principal and interest. The machine will be depreciated at 20% per year. The company will pay $8,000 per year for maintenance services. The company plans to keep the machine even after its payback period. What is the total amount paid? A) $236,337.96 B) $304,972.67 C) None of the above D) $361,442.71 (Choose one option)
A new machine can be purchased for $1,500,000. It will cost $45,000 to ship and $55,000 to install the machine. The new machine will replace an older machine that is fully depreciated and will be sold for $125,000. The firm’s income tax rate is 40%. What is the initial outlay (IO) for the new machine? $1,525,000 $1,600,000 $1,675,000 $1,725,000
MAG Industrial needs 1000 square meters of storage space. Purchasing land for $80,000 and then erecting a temporary metal building at $70 persquare meter is one option. The president hopes to sell the land for $100,000 and the building for $20,000 after 3 years. Another option is to lease space for $30 per square meter per year payable at the beginning of each year. The MARR is 20%. Perform a present worth analysis of the building and leasing alternatives to determine the sensitivity of the decision if the construction cost decreases by 10% to $63 per square meter and the lease cost remainsat $30 per square meter per year.
A construction company can purchase a used backhoe for $90,000 and spend $450 per day in operating costs. The equipment will have a 5 -year life then sell it at salvage for $3,000. Alternatively, the company can lease the equipment for $800 per day. How many days per year must the company use the equipment in order to justify its purchase at an interest rate of 6% per year.
A road construction company is considering the purchase of a gravel hauler as it prepares for a new season of rural road construction. The hauler will cost $110,000, last six years with a salvage value of $20,000, and reduce annual maintenance, insurance, and labour costs by $30,000 per year. The after-tax MARR is 9% and the corporate tax rate is 55%. a. What is the exact after-tax IRR for this purchase? b. What is the approximate after-tax IRR for this purchase? c. Should the company buy the gravel hauler? Why or why not?
The market value of the property that you own is $15 million. The gross annual rental income for this property is $600,000. The tax rate is 28% . The set up costs (renovations ect) in order to use the building and land for your own business operations are $7,000,000. The annual revenue if you were to use the building forr your own business operations with low demand would be $5 million and have a 30% chance of occuring. The annual revenue if you were to use the building for your own business operations with medium demand would be $9 million and have a 40% chance of occuring. he annual revenue if you were to use the building for your own business operations with high demand would be $13 million. The variable costs (% of revenue) is 65 %. The fixed costs are $2.5 million. The costs of capital is 10% and the risk free rate is 3%. he initial cost for setting up the expansion of business can be fully depreciated over 10 years using the straight-line method. The value of land will be…
A company must purchase a new machine to increase production. The machine will cost $50,000 to purchase. The following are the remaining cash flows of the machine and its probabilities. The machine is supposed to be used for 6 years and the MARR is 10%. Annual Cost Annual Revenue Calculate the Present Worth. Probability .2 .6 .2 .6 .4 Outcome $3,000 $4,500 $5,500 $35,000 $40,000
2. Suppose that you are considering speculating on some vacant land located on Bali Hai, an island in the South Pacific. You could acquire the land today for $850,000. You plan on holding it for fifteen years and then selling it. Annual taxes, insurance and upkeep (mowing, clearing of debris, etc.) of the land will be $35,000, paid at the end of the first year. These costs will increase annually at a 2.5% rate until you sell the land at the end of the fifteenth year. If you require an annual rate of return of 20%, what is the minimum amount that you have to net (after commissions, transfer taxes, fees, etc.) on the sale of this land at the end of the final year to earn your required rate of return? (Ignore income taxes)
You want to buy a new plant with a price of Rs. 400,000. The borrowing cost is 10% interest rate to be paid at the end of each year. If it is purchased, the maintenance fee is Rs.10,000 per year paid at the end of each year. The depreciation falls in the MACRS 5-year class, rates are 30%, 20%, 10%, and 09%. The tax is 40%. Alternatively, the plant can be taken on lease for Rs. 85,000 upon delivery with 4 more annual rentals of Rs. 85,000 to be made at the end. This alternative includes maintenance requirement. After 04 years the asset’s salvage value is expected to be Rs. 20, 000. Required: What do you suggest should the plant be leased or purchased? Why?

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