A Construction Company has just purchased a fleet of five truck to be used for delivery in a particular city. Initial cost was $3000 per truck and the expected life and salvage value is 12 years and $700 respectively. The combine insurance, maintenance, gas and lubrication cost are expected to be $1000 for the first year and to increase by $100 per year thereafter, while delivery service will bring an extra $3000 (revenue) in every 2 years for the company. If the interest is 12% per year find the total cost of this investment.
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A Construction Company has just purchased a fleet of five truck to be used for delivery
in a particular city. Initial cost was $3000 per truck and the expected life and salvage
value is 12 years and $700 respectively. The combine insurance, maintenance, gas and
lubrication cost are expected to be $1000 for the first year and to increase by $100 per
year thereafter, while delivery service will bring an extra $3000 (revenue) in every 2
years for the company. If the interest is 12% per year find the total cost of this investment.
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- A drugstore chain has just purchased a fleet of five pickup trucks to be used for delivery in a particular city. Initial cost was $5000 per truck and the expected life and salvage value is 10 years and $600, respectively. The combine insurance, maintenance, gas and lubrication cost are expected to be $750 for the first year and to increase by $50 per year thereafter, while delivery service will bring an extra $2000 (revenue) in every 2 years for the company. If a return of 10% per year find the total cost of this investment.A construction company has several projects that need a specific mechanism to be used for five years in its projects. The company found that the options available to it are either to buy the mechanism at a price of $50,000 and need maintenance and operating costs of $2000 annually, and then sell it at a price of $10,000 at the end of the fifth year. Or to rent the mechanism at a price of $8000 per year, to be paid at the beginning of the year, and you need maintenance and operating costs of $3,000 annually. Which of the two options would be the best if you knew that the interest rate approved by the company is 6%?An excavator is purchased now with a cost of $200,000. The excavator will need major maintenance every year, with the first maintenance occurring at EOY 1. The cost of maintenance at EOY 1 is $20,000, and the cost increases by 2,000 each time it is performed. The life of the excavator is 20 years. At EOY 20, the excavator will be sold for $40,000. Nominal interest rate is given as 24% compounded monthly. Find the net present worth of this investment.
- The organization you are employed by is investing in new machinery for their warehouse. The $1.2 million initial investment is made. In year 1, the annual maintenance expenditures are $42,000, and they rise by $3,000 annually after that. In the first year, the revenues are $118,000, and they rise by 6% annually. After the equipment's 12-year useful life, a $25,000 salvage value will be obtained.a) The rate of return company made during progressb) If the desired MARR is 5%, is this a good investment?A bulk-water supplier has been awarded by a city to supply their potable water for the next 10 years. The city will pay the supplier $150,000 per year during the 10-year contract.. The supplier needs to set-up an additional water purification facilities that will have a first cost of $250,000 with an estimated salvage value of 10% of its first cost after 10 years. The operating cost is difficult to estimate, but company engineers have made optimistic, most likely, and pessimistic estimates. The optimistic estimate is that the operating cost will just be constant at $75,000 per year. The most likely estimate is that it will be $75,000 initially and will increase by $5,000 per year. The pessimistic estimate is that it will be $75,000 initially increasing at a rate of 10% per year. Determine if at which operating scenario the supplier will be able to make the most profit. The before tax MARR is 18% per year.Coast-to-Coast Inc. is considering the purchase of an additional delivery vehicle for $70,000 onJanuary 1, 20Y1. The truck is expected to have a five-year life with an expected residual valueof $15,000 at the end of five years. The expected additional revenues from the added deliverycapacity are anticipated to be $65,000 per year for each of the next five years. A driver will cost$40,000 in 20Y1, with an expected annual salary increase of $2,000 for each year thereafter. The annual operating costs for the truck are estimated to be $6,000 per year.a. Determine the expected annual net cash flows from the delivery truck investment for 20Y1–20Y5.b. Compute the net present value of the investment, assuming that the minimum desired rate of returnis 12%. Use the present value table appearing in Exhibit 2 of this chapter.c. Is the additional truck a good investment based on your analysis? Explain.
- A local county government is considering purchasing some dump trucks for thetrash pickups. Each truck will cost $55,000 and have an operating and maintenance cost that starts at $18,000 the first year and increases by $3,000 per yearthereafter. Assume the salvage value is $12,000 at the end of 5 years and theinterest rate is 10%. The equivalent annual cost of owning and operating eachtruck is most nearly(a) $35,974 (b) $32,600(c) $6,956 (d) $37,939Peachtree Construction Company, a highway contractor, is considering the purchase of a new trench excavator that costs $300,000 and can dig a 3-foot-wide trench at the rate of 16 feet per hour. The contractor gets paid according to the usage of the equipment. $100 per hour. The expected average annual usage is 500 hours, and maintenance and operating costs will be $10 per hour. The contractor will depreciate the equipment by using a five-year MACRS, units-of-production method. At the end of five years, the excavator will be sold for $100,000.(a) Assuming that the contractor's marginal tax rate is 35% per year, determine the annual after-tax cash flow.(b) Is this a good investment if the contractor requires 15% return on investment?Coast-to-Coast Inc. is considering the purchase of an additional delivery vehicle for $38,000 on January 1, 20Y1. The truck is expected to have a 5-year life with an expected residual value of $7,000 at the end of 5 years. The expected additional revenues from the added delivery capacity are anticipated to be $66,000 per year for each of the next 5 years. A driver will cost $46,000 in 20Y1, with an expected annual salary increase of $4,000 for each year thereafter. The annual operating costs for the truck are estimated to be $2,000 per year. Year 1 2 3 4 5 6 7 8 9 10 20Y1 20Y2 20Y3 20Y4 Present Value of $1 at Compound Interest 6% 10% 12% 20Y5 0.943 0.890 0.840 Investment 0.792 0.747 0.705 0.665 0.627 0.592 0.558 0.909 0.826 0.751 0.683 0.621 Net present value 0.564 0.513 0.467 0.424 0.386 $ 0.893 0.797 0.712 0.636 $ $ 0.567 0.507 $ 0.452 Annual Net Cash Flow 0.404 0.361 0.322 15% 0.870 0.756 0.658 a. Determine the expected annual net cash flows from the delivery truck investment for…
- Alfred Home Construction is considering the purchase of five dumpsters and the transport truck to store and transfer construction debris from building sites. The entire rig is estimated to have an initial cost of $142,500, a life of 8 years, a $8500 salvage value, an operating cost of $40 per day, and an annual maintenance cost of $8000. Alternatively, Alfred can obtain the same services from the city as needed at each construction site for an initial delivery cost of $125 per dumpster per site and a daily charge of $34 per day per dumpster. An estimated 19 construction sites will need debris storage throughout the average year. If the minimum attractive rate of return is 11% per year, how many days per year must the equipment be required to justify its purchase? The number of days per year the equipment must be required is determined to beAssume that you are using a crane with 5 years of service remaining. The existing crane has a book value of $50,000, a salvage value of $5,000, and O&M first-year cost of $10,000 (O&M cost will increase at $2,000 /year thereafter) A new crane can be purchased for $100,000 with a 10-year service life. O&M costs for the first year are $4,000 with $500/year increase thereafter. The estimated resale value is $40,000 at year 5. Should you buy the new crane with i =10% ?To manufacture a new line of cleaning supplies, a company must immediately invest $775,000 in new equipment. At the end of Years two and six, there will have to be a major overhaul of the equipment at a cost of $150,000 on each occasion. The new product is expected to increase annual operating profits by $150,000 in each of the first four years, and by $125,000 in each of the subsequent three years. The equipment will then be salvaged at the end of year seven to recover about $200,000. Should the product be manufactured if the company's cost of capital is 13% compounded annually?