A new machine will cost P17000 and will have an estimated salvage value of P11000 in five years. Special tools for the new machine will cost P5000 and will have a resale value of P2500 at the end of five years. Maintenance costs are estimated at P200 per yr. What will be the average annual cost of ownership during the next five years if interest is 6%?

A new machine will cost P17000 and will have an estimated salvage value of P11000 in five years. Special tools for the new machine will cost P5000 and will have a resale value of P2500 at the end of five years. Maintenance costs are estimated at P200 per yr. What will be the average annual cost of ownership during the next five years if interest is 6%?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 17EA: Gardner Denver Company is considering the purchase of a new piece of factory equipment that will...

See similar textbooks

Similar questions

Gardner Denver Company is considering the purchase of a new piece of factory equipment that will cost $420,000 and will generate $95,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further Instructions on internal rate of return in Excel, see Appendix C.
The machine bought for P60, 000 is expected to last for 30 years. If the book value after 20 years is P20,000. How much is the depreciation each year, and the book value after 10 years.
A new machine for your company has a first cost of $80,000 and an estimated net salvage value of $15,000 at the end of 20 years. It is expected to have operating and maintenance costs of $3,000 per year, and it is expected to reduce costs by $5,000 per year. Assume an interest rate of 8%. What is the annual equivalent cost of the investment if the planning horizon is 20 years?
A company wants to buy a drilling machine that will go down to 300 meters. When this drilling machine is purchased, it will cost 500.000 TL. Annual operation-maintenance cost will be 35.000 TL per year. It is expected that the recurring major maintenance cost will be 155.000 TL every 5 years. Estimated salvage value at the end of its useful life is 115.000 TL. If the useful life of this machine is 15 years and interest rate is 25%, how much income should the company earn every year to buy this machine?
A company is considering buying a new piece of machinery. the initial cost of the machine is 80,000 and its salvage value is 20,000 at the end of 20 years. annual operating cost is 18,000. what is the equivalent uniform annual cost of the machine based on 10% interest rate?
A customer is going to buy a brand new pump and motor. It has an initial cost of $10,000. The lifetime of the pump is fifteen years and is estimated to save about $1,000 per year. There is also an additional cost of maintenance at $300 per year with the pump. At the end of its lifetime, the pump will have a salvage value of $0. The interest rate is at 4%. Find the annual value of the pump and what is the salvage value for the pump in order to break even?
Automating a process will cost $8000 now, but it will save $2200 annually for 5 years. The machinery will have a salvage value of $1500. What is the present worth of the machinery if the interest rate is 10%?
A new airconditioning unit costs P150,000and will have a salvage value of P15,000after 5 years. Electrical cost per kWh isP1.25. Calculate the annual savings in termsof electrical savings if MARR is 15% per year.
A machine will cost $30,000 to purchase. Annual operating and maintenance costs (O&M) will be $2000. The machine will save $10,000 per year in labor costs. The salvage value of the machine after 5 years will be $7000. Calculate the machine’s present worth for an interest rate of 10%.
A project has a $53000 first cost that returns $5000 per year over its 15 year life. It has a $12000 salvage value at the end of its 15 years. If the MARR is 8%, what is the payback period of this project in years?
To increase production, an engineer is considering the purchase of a new machine. The machine costs P350 000.00 and will have a salvage value of P10 000.00 at the end of eight years. Operating and maintenance cost is expected to be P4000.00 per year. With this machine. Annual revenue is expected to increase by P85 000.00. Using future worth analysis and a 15% rate of return, determine if the purchase should be recommended. (Ans. FT = P51 214.34 )-PLEASE USE AN ACTUAL FORMULA NOT AN EXCEL
CAGELCO is considering the purchase of a new turbo generator set that will last 5 years with a cost of P 500, 000. Maintenancewill cost P 6,000 for the first year, decreasing by P 1, 000each year to P2,000 the 5thyear. If the interest rate is 8% per year, compounded annually, how much money should the company set aside for this machine? show your solution