Kris Kringle Corp. needs to purchase a new delivery vehicle. The Sleigh 9000 model'spurchase price is $90,000, will last for 20 years, and requires maintenance costs of $5,000per year for the first 10 years (years 1-10) and $8,000 per year for the last 10 years (years11-20). What is the equivalent annual cost (EAC) of this equipment at a discount rate of12.25%?$6.602$17957$13991$11,000$6,890

The equivalent annual cost is the capital budgeting tool that can be used by the evaluator to…

Answered: Kris Kringle Corp. needs to purchase a…

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 new electronic process monitor costs $990,000. This cost could be depreciated at 30 percent per year (Class 10). The monitor would actually be worthless in five years. The new monitor would save $460,000 per year before taxes and operating costs. If we require a 15 percent return, what is the NPV of the purchase? Assume a tax rate of 40 percent. (Do not round intermediate calculations. Round the final answer to 2 decimal places.) NPV
A construction company can purchase a used backhoe for $90,000 and spend $450 per day in operating costs. The equipment will have a 5 -year life then sell it at salvage for $3,000. Alternatively, the company can lease the equipment for $800 per day. How many days per year must the company use the equipment in order to justify its purchase at an interest rate of 6% per year.
) Hendrix Company needs a new warehouse. Below are three potential options for purchasing a new warehouse. Which would you recommend? Hendrix's borrowing rate is 8%. Building 1: $1,500,000 cash purchase Building 2: Take out a 25 year loan - annual payments ($125,000) due at the beginning of each year Building 3: $1,750,000 cash purchase. There is extra space in this building that can be rented out over the 25 years. The rental agreement would state that annual payments ($21,000) are due at the end of each year. SU 000 of Insist Worth rataillon 022) CC-001 vnsqmio Telln 2012
Elijah Enterprises will need to upgrade the computer system in 4 years. They anticipate the upgrade to cost $105,300. If the discount rate is 13%, what will be the required yearly investment needed to obtain the money for the upgrade?Round your (1+R)^n value to 2 decimal places and use that number for your final amount required rounded to the nearest dollar. Future Value / (1+R)^n = Amount Required / = What would be required if the discount rate was 8%? Future Value / (1+R)^n = Amount Required / =
Deutsche Transport can lease a truck for four years at a cost of €38,000 annually. It can instead buy a truck at a cost of €88,000, with annual maintenance expenses of €18,000. The truck will be sold at the end of four years for €24,500. Ignore taxes. a. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 12%? 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
Elijah Enterprises will need to upgrade the computer system in 5 years. They anticipate the upgrade to cost $98,900. If the discount rate is 15%, what will be the required yearly investment needed to obtain the money for the upgrade?Round your (1+R)^n value to 2 decimal places and use that number for your final amount required rounded to the nearest dollar.
Use the following information for the next TWO (2) questions: A farm must decide whether or not to purchase a new tractor. The tractor will reduce costs by P2, 000 in the first year, P2, 500 in the second, and P3, 000 in the third and final year of usefulness. The tractor costs P9, 000 today, wihile the above cost savings will be realized at the end of each year. If the interest rate is 7 percent. QUESTION NO. 3 What is the present value of cash inflaw from purchasing the tractor? Your answer QUESTION NO.4 What is the net present volue of purchasing the tractor, accept or reject? Your ariswer
Kamil Koç Transportation is considering two models of buses for newly opened routes. Bus Model 1 will have a first cost of $160912, an operating cost of $21338 per year, and a resale value of $86231 after 6 years. Bus Model 2 will have a first cost of $108347, an operating cost of $15486 per year, and also have a $75850 resale value, but after 4 years. At an interest rate of 7% per year, which model should the Kamil Koç buy based on an annual worth analysis? What is the annual worth and the present worth of the selected alternative? Select one: a. Bus Model 1 is selected, AW is $-25017 and PW is $-102936 b. Bus Model 2 is selected, AW is $-30390 and PW is $– 30390 c. Bus Model 1 is selected, AW is $-25017 and PW is $-205161 d. Bus Model 2 is selected, AW is $-33123 and PW is $ – 102936 e. Bus Model 2 is selected, AW is $-33123 and PW is $-205161 f. Bus Model 1 is selected, AW is $-30390 and PW is $-102936
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A firm can lease a truck for 4 years at a cost of $35,000 annually. It can instead buy a truck at a cost of $85,000, with annual maintenance expenses of $15,000. The truck will be sold at the end of 4 years for $25,000. a. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 12%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Equivalent annual cost b. Which is the better option? Lease O Buy
Green Power Company is considering acquiring a new machine that will last 14 years and it can be purchased right now for 116,319 dollars; maintenance will cost 23,444 dollars the first year, increasing by 6,434 dollars per year thereafter (e.g. maintenance at the end of year two is equal to 23,444 plus 6,434 dollars). If the interest rate is 7% per year, compounded annually, how much money should the company set aside now to purchase and provide for the future maintenance of this machine (NPV)? (note: round your answer to the nearest cent and do not include spaces, currency signs, or commas)
Fabco, Inc., is considering purchasing flow valves that will reduce annual operating costs by $10,000 per year for the next 12 years. Fabco’s MARR is 7%/year. Using an internal rate of return approach, determine the maximum amount Fabco should be willing to pay for the valves. $

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