9. Two machinery alternatives are described below. Complete the table below, assuming an interest rate of 6% and a useful lifetime of 8 years. Alt. 1: The initial purchase price of the machine is $25,000. The salvage value at the end of the useful life will be $5000. Maintenance costs are $2000 for the first' year and remains same for the rest of the life. Alt.2 2: The machine is leased for an initial payment of $2000 plus annual payments of $3500. There is no salvage value. A maintenance contract is purchased for a single payment of $10,000 at the start of the lease period. It 2 PWB PWC NPW State selection criteria and make decision on what alt. to select?

9. Two machinery alternatives are described below. Complete the table below, assuming an interest rate of 6% and a useful lifetime of 8 years. Alt. 1: The initial purchase price of the machine is $25,000. The salvage value at the end of the useful life will be $5000. Maintenance costs are $2000 for the first' year and remains same for the rest of the life. Alt.2 2: The machine is leased for an initial payment of $2000 plus annual payments of $3500. There is no salvage value. A maintenance contract is purchased for a single payment of $10,000 at the start of the lease period. It 2 PWB PWC NPW State selection criteria and make decision on what alt. to select?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The management of River Corporation is considering the purchase of a new machine costing $380,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Year 1 2 O 10.5% O 5.5% O 25.5% Operating O 15.5% Income $20,000 20,000 20,000 20,000 20,000 Net Cash Flow $95,000 95,000 The average rate of return (rounded to one decimal place) for this investment is 95,000 95,000 95,000
Give answer with explanation and provide correct and incorrect option explanation
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T1).
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Consider the following alternatives below.Based on a 7% interest rate, assuming both alternatives perform the same task and there is a continuing requirement, which alternative should be selected and what is its equivalent uniform annual cost?
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Question 1) Nascar Company has two alternatives for a new truck investment: Buy or lease. Buying option: The purchasing cost of the truck is 230.000 dollars. The economic life will be five years and at the end fifth year the truck will have a salvage value, 40.000 dollars Repair and insurance costs: 1.year 10.000 dollars 2.year 15.000 3.year 20.000 4.year 25.000 5.year 28.000 Leasing option: Lease period: 5 years Annual lease payments: 60.000 dollars (payments will be made at the beginning of each year) Also, at the beginning of contract period Nascar Co. must pay a deposit, 20.000 dollars. This deposit amount will be refunded at the end of fifth year. According to the leasing contract all repair and insurance expenses are under the responsibility of leasing company. Make your decision according to Net Present Value Method. (Assume the discount rate of the company is 12%) Present value of 1 dollar Period Discount rate (12%) 1 0,893 2 0,797 3…