Evaluate and select the best purchase of the following vehicles using straight line depreciation, a tax rate of 25%, and an after-tax MARR of 9% per year: Vehicle A: Cost = $20,000, Salvage Value= $5000, Annual operating cost = $1000, Life = 6 years Vehicle B: Cost = $15,000, Salvage Value = $2000, Annual operating cost = $1200, Life = 6 years %3D %3D %3D %3D **Remember that this is based on Chapter 12, not the Park chapter, so no opportunity cost needs to be considered, this is a straight PW comparison after taxes***

Evaluate and select the best purchase of the following vehicles using straight line depreciation, a tax rate of 25%, and an after-tax MARR of 9% per year: Vehicle A: Cost = $20,000, Salvage Value= $5000, Annual operating cost = $1000, Life = 6 years Vehicle B: Cost = $15,000, Salvage Value = $2000, Annual operating cost = $1200, Life = 6 years %3D %3D %3D %3D Remember that this is based on Chapter 12, not the Park chapter, so no opportunity cost needs to be considered, this is a straight PW comparison after taxes*

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A firm is trying to decide which of two machines to purchase as described in in the table below. Using the interest rate 9% or 0.09, use present worth analysis to determine which machine, if either, should be purchased. Show all your work. Machine: A - B First Cost: $800 - $600 Annual Net Benefit: $130 - $230 Salvage Value: $40 - $20 Usefil Life (years): 9 - 3
Perform a PW-based evaluation of the two alternatives below. The after-tax MARR is 10% per year, MACRS depreciation applies, and T.= 42%. The (GI – OE) estimate is made for the first three years; it is zero in year 4 when each asset is sold. %3D Alternative First Cost. $ -8,000 -13,000 Salvage value, year 4, $ GI – OE, $ per year 3,500 5,000 Recovery period, years
In the choice of mechanical equipment you are required to submit your recommendation as to which of the two steam shovels for earth excavation is better to buy. The basis is 20 year service & interest at 7%. Taxes & insurance are the same in each case: 5% & 1% respectively. Use Annual Cost & CC. 50-ton shovel 70 ton shovel First Cost P30k P38k 20 years 20 years P2k Life Salvage value Annual Operation Annual Upkeep Annual Output P3k P15k P17k P1.5k P2k 150k yards 200k yards
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Perform a present worth (PW)-based evaluation of the two alternatives below using a spreadsheet. The after-tax minimum acceptable rate of return (MARR) is 8% per year, Modified Accelerated Cost Recovery System (MACRS) depreciation applies, and Te=40%. The (GI -OE) estimate is made for the first 3 years; it is zero in year 4 when each asset is sold. Alternative First Cost, $ Salvage Value, Year 4, $ GI-OE, $ per Year Recovery Period, Years X -8,000 0 3,500 3 Y -13,000 2,000 5,000 3 The PW for alternative X is determined to be $ The PW for alternative Yis determined to be $ Alternative (Click to select) is selected.
If B = $400,000, n = 6 years, and S is estimated at 15% of B for a new pavement recycling machine, use the SYD method to determine (a) the book value after 3 years, and (b) the rate of depreciation and the depreciation amount in year 4.
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Description You are to create a year-by-year depreciation schedule for an asset that has a cost basis (B) of $950,000 and estimated salvage value (SV 10) of $80,000 after 10 years. For the straight-line and declining balance methods, use a depreciable life (N) of 10 years. For MACRS, use a recovery period (N) of 7-yrs. ΕΟΥ, Κ 0 1 2 3 st 4 5 6 7 8 'a 9 10 Straight-Line BVk $950,000 Declining Balance dk BVk $950,000 dk MACRS BVk 950,000
Linda's Luxury Travel (LLT) is considering the purchase of two Hummer limousines. Various information about the proposed investment follows: Initial investment (2 limos) Useful life Salvage value Annual net income generated LLT's cost of capital $1,140,000 $ 130,000 $ 101,460. 14% 1. Accounting rate of return. 2. Payback period. 10 years Assume straight line depreciation method is used. Required: Help LLT evaluate this project by calculating each of the following: 3. Net present value. 4. Without making any calculations, determine whether the IRR is more or less than 14%.

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