Deutsche Transport can lease a truck for four years at a cost of €41,000 annually. It can instead buy a truck at a cost of €91,000, with annual maintenance expenses of €21,000. The truck will be sold at the end of four years for €26,000. Ignore taxes. a. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 10%? Note: Do not round intermediate calculations. Enter your answer in euros. Round your answer to the nearest whole number. b. Which is the better option: leasing or buying? a. Equivalent annual cost b. Better option € 41,000 Leasing

Deutsche Transport can lease a truck for four years at a cost of €41,000 annually. It can instead buy a truck at a cost of €91,000, with annual maintenance expenses of €21,000. The truck will be sold at the end of four years for €26,000. Ignore taxes. a. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 10%? Note: Do not round intermediate calculations. Enter your answer in euros. Round your answer to the nearest whole number. b. Which is the better option: leasing or buying? a. Equivalent annual cost b. Better option € 41,000 Leasing

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter8: Cost Analysis

Section: Chapter Questions

Problem 3E

See similar textbooks

Similar questions

Use a calculator for this exercise.Suppose you obtain a five-year lease for a Porsche and negotiate a selling price of $143,000. The annual interest rate is 8.4%, the residual value is $76,000, and you make a down payment of $7000. Find each of the following. (a) The net capitalized cost$ (b) The money factor (rounded to four decimal places)(c) The average monthly finance charge (rounded to the nearest cent)$ (d) The average monthly depreciation (rounded to the nearest cent)$ (e) The monthly lease payment (rounded to the nearest cent)$
You are considering adding a new software title to those published by your highly successful software company. If you add the new product, it will use capacity on your disk duplicating machines that you had planned on using for your flagship product, "Battlin' Bobby." You had planned on using the unused capacity to start selling "BB" on the West coast in two years. You would eventually have had to purchase additional duplicating machines 10 years from today, but using the capacity for your new product will require moving this purchase up to 2 years from today. If the new machines will cost $115,000 and can be expensed under Section 179, your marginal tax rate is 21 percent, and your cost of capital is 16 percent, what is the opportunity cost associated with using the unused capacity for the new product? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.) Opportunity cost
You are considering adding a new software title to those published by your highly successful software company. If you add the new product, it will use capacity on your disk duplicating machines that you had planned on using for your flagship product, "Battlin' Bobby." You had planned on using the unused capacity to start selling "BB" on the West coast in two years. You would eventually have had to purchase additional duplicating machines 10 years from today, but using the capacity for your new product will require moving this purchase up to 2 years from today. If the new machines will cost $115,000 and will be depreciated straight-line over a 5-year period to a zero salvage value, your marginal tax rate is 32 percent, and your cost of capital is 12 percent, what is the opportunity cost associated with using the unused capacity for the new product?
Compute the discount if $ 2,000 is discounted for 6 months at 8% simple interest
A manufacturing company leases a building for $100,000 per year for its manufacturing facilities. In addition, the machinery in this building is being paid for in installments of $20,000 per year. Each unit of the product produced costs $15 in labor and $10 in materials. The product can be sold for $40. Use this information to solve, If the selling price is lowered to $35 per unit, how many units must be sold each year for the company to earn a profit of $60,000 per year? (a) 12,000 (b) 10,000 (c) 16,000 (d) 18,000 (e) 5,143. Select the closest answer.
A company is developing a new electronic product. It expects to spend $38 million on Research and Development and then another $6 million on Manufacturing Engineering. After completing all this, the company expects a cost of $15 per unit to manufacture and plans to build in a profit of $5 per unit into the price. The company needs to recover the cost of R&D plus Manufacturing Engineering over five years through sales of 4 million units over those five years. What will the company need to establish as the sales price for the unit?
Calculate the present value of an asset that pays $225 at the end of each year for 6 years and has a face value payment of $500
8. The anticipated cash dividends for Delta Electronics over the next four years are as follows: 2023-$8, 2024-$9, 2025-$10, and 2026-$11. John is interested in buying some shares of this stock for a total of $100 and willI hold them for four years. If John's interest rate is known to be 8% compounded annually, what would be the desired (minimum) total selling price for the set of shares at the end of the fourth year? * $93.67 $66.35 $86.23 $90.11
A 6 year corporate bond of a value of €10,000 at maturity earns an annual cash payment of €650. If the market discount rate is 54% how much are you prepared to pay today to buy it?
The current yearly tuition fee for your university is $240,000. If you parents made a lumpsum investment 18 years ago which earned interest of 6.5%, how much did they invest to be able to pay tuition this year?
A company is looking at purchasing a new Zeiss CMM (precision measurement machine). They believe having this machine will allow them to get a new contract. The machine would cost $525,000. It would allow the manufacturer to produce 250 custom engine block heads per day (350 days per year) at a gross profit of $1.95 each, but the company would have to pay tax of 25% on their profit. Assuming you looked at everything on a yearly basis and that the project would go on for 5 years, what is the rate of return (%) on this project? (round to the nearest tenth of a percent) 3.5% 9.5% 7.0% 7.5%
You inherit $10K when you are 20. What is this worth when you are ready to retire at 65? Assume that the money can be invested at 7%, which is your interest rate for the time value of money. Compare this with an insurance policy that could be purchased with a lump-sum payment of $10K. That policy would pay you $100K at age 65 and your survivors $100K if you die sooner. How much value per year must you put on protecting your survivors for these to be equivalent?