D00 and a remaining useful life of five years. At the end of the five years the spotter truck will have a zero-salvage value. ISooky canve $32,70o0 in return for trading in its old spotter truck. The old spotter truck has varlable manufacturing costs of $92,000 per year.ing costs by $26,700 per year over the five-year life of the new spotter truck. The total Increase or decrease in Income by Sooky has a spotter truck with a book value of $57,000 and a remaining useful Ilfe of five years. At the end of the five years the spottepurchase a new spotter truck for $137,000 and receive $32,700 in return for tradlng in Its old spotter truck. The old spotter truck hasThe new spotter truck will reduce varlable manufacturing costs by $26,700 per year over the five-year Iife of the new spotter truck.replacing the current spotter truck with the new truck is:Multiple Cholce$29,200 decrease$29,200 increase$32,700 increase$137,000 decrease$32,700 decrease

The purchase of new non cash assets in exchange of old asset, can lead to increase revenue for the…

Do and a remaining useful Iife of five years. At the end of the five years the spotter truck will have a zero-salvage value. ISooky can e $32,70O In return for trading in its old spotter truck. The old spotter truck has varlable manufacturing costs of $92,000 per year ng costs by $26,700 per year over the five-year life of the new spotter truck. The total Increase or decrease In lncome by

Do and a remaining useful Iife of five years. At the end of the five years the spotter truck will have a zero-salvage value. ISooky can e $32,70O In return for trading in its old spotter truck. The old spotter truck has varlable manufacturing costs of $92,000 per year ng costs by $26,700 per year over the five-year life of the new spotter truck. The total Increase or decrease In lncome by

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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A "standard" model of a dozer costs $20,000 and has an annual operating expense of $450. The dozer will be replaced in 6 years when the salvage value is expected to be $2,000. A "super" model can be purchased for $25,000, but will have a salvage value of $7,000 when retired in 6 years. Its operating expenses are also $450 a year. The purchaser's other investment opportunities are 5%. Compare these alternatives by using the annual equivalent method.
The Georgia Ceramic Company has anautomatic glaze sprayer that has been used for thepast 10 years. The sprayer can be used for another10 years and will have a zero salvage value at thattime. The annual operating and maintenance costsfor the sprayer amount to $15,000 per year. Due toan increase in business, a new sprayer must be purchased. Georgia Ceramic is faced with two options.• Option 1: If the old sprayer is retained, a newsmaller capacity sprayer will be purchased at a costof $48,000, and it will have a $5,000 salvage valuein 10 years. This new sprayer will have annualoperating and maintenance costs of $12,000. Theold sprayer has a current market value of $6,000.• Option 2: If the old sprayer is sold, a newsprayer of larger capacity will be purchased for$84,000. This sprayer will have a $9,000 salvagevalue in 10 years and will have annual operatingand maintenance costs of $24,000.Which option should be selected at MARR = 15%?
A three-year-old small crane is being considered for early replacement. Its current market value is $17,500. Estimated future market values and annual operating costs for the next five years are given in the table below. What is the economic life for this crane if the interest rate is 5.1% per year? Year 0 Market Value Annual Operating Cost $17,500 1 $15,110 $4,700 2 $12,930 $4,809 3 $10,110 $4,883 4 $7,400 $4,997 5 $- $5,095
Coronado, Inc. is considering purchasing equipment costing $39000 with a 7-year useful life. The equipment will provide cost savings of $8700 and will be depreciated straight-line over its useful life with no salvage value. Coronado Inc. requires a 9% rate of return. What is the approximate internal rate of return for this investment? Period 7 10% O 11% 000 9% 8% 7% 5.389 8% Present Value of an Annuity of 1 5.206 9% 5.033 10% 4.868 11% 4.712 14% 4.288
A machine was purchased 4 years ago. Its current market value is $14,000. Estimated future market values and annual operating costs for the next 5 years are given in the following table. What is the Economic service life of the machine if a 12% per year return is required? YearMarket Value,$Annual Operating cost,$ 10084 2 2684 2700 3000 3500 4900 1 8084 6000 3 4 2000 5
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The AW values for retaining a presently owned machine for additional years are shown in the table. Note that the values represent the AW amount for each of the n years that the asset is kept, i.e., if it is kept 5 more years, the annual worth is $−95,000 for each of the 5 years. Assume that future costs remain as estimated for the replacement study and that used machines like the one presently owned will always be available. (a) What is the ESL and associated AW of the defender at a MARR of 12% per year? (b) A challenger with an ESL of 7 years and an AWC = $-88,000 per year has been identified. Which AW will be less for the respective ESL periods? Retention Period, Years AW Value, $ per Year 1 -87,000 2 -93,000 3 -85,000 4 -83,000 5 -95,000 a) The ESL of the defender is_____ year(s) with the lowest AW of $_________ . b) The______________ has the lower AW at _________$ for n equal to ______ .
A construction company must replace a piece of heavy earth-moving equipment. Cat and Volvo are the two best alternatives. Both alternatives are expected to last 8 years. If the company has a minimum attractive rate of return (MARR) of 11%, which alternative should be chosen? Use IRR analysis. Cat Volvo First cost $15,000 $22,500 Annual operating cost 3,000 1,500 Salvage value 2,000 4,000 Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
Winthrop Company has an opportunity to manufacture and sell a new product for a five-year period. To pursue this opportunity, the company would need to purchase a plece of equipment for $130,000. The equipment would have a useful life of five years and a $10,000 salvage value. The CCA rate for the equipment is 30%. After careful study. Winthrop estimated the following annual costs and revenues for the new product: Sales revenues: Variable expenses Fixed expenses $250,000 $130,000 $ 70,000 The company's tax rate is 30% and its after-tax cost of capital is 10%. Required: 1. Compute the net present value of the project. (Hint Use Microsoft Excel to calculate the discount factor(s).) (Do not round intermediate calculations and PV factor. Round the final answers to the nearest whole dollar. Negative value should be indicated with minus sign.) 2. Would you recommend that the project be undertaken? 1. Net present value 2 Would you recommend that the project be undertaken?
$500,000 is invested in equipment having a negligible salvage value regardless of the number of years used. O&M costs equal $125,000 the first year and increase $25,000 per year. Based on a MARR of 10%, what are the optimum replacement interval and minimum EUAC?
please as soon as possible . thank you
Salty Nuts, Inc. must buy a new nut-shelling machine. The industrial engineer has collected the following information concerning the apparent best alternative. Calculate the net future worth of the alternative if the MARR is 6%.