$357,000. Tires for this machine cost $27,000. The company believes it can sell the loader after 7 years (3,300 hr/yr) of service for $70,000. There will be no major overhauls. The company's cost-of-capital is 6.45%. What is the depreciation part of the machine's ownership cost? Use the time value method to calculate depreciation.

$357,000. Tires for this machine cost $27,000. The company believes it can sell the loader after 7 years (3,300 hr/yr) of service for $70,000. There will be no major overhauls. The company's cost-of-capital is 6.45%. What is the depreciation part of the machine's ownership cost? Use the time value method to calculate depreciation.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 14P

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

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Nx360
1. Asphalt Pavers, Inc. Purchases a loader to use at its asphalt plant. The purchase price delivered is
$357,000. Tires for this machine cost $27,000. The company believes it can sell the loader after 7 years
(3,300 hr/yr) of service for $70,000. There will be no major overhauls. The company's cost-of-capital is
6.45%. What is the depreciation part of the machine's ownership cost? Use the time value method to
calculate depreciation.
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