Required information A land development company is considering the purchase of earth-moving equipment. This equipment will have an estimated first cost of $205,000, a salvage value of $85,000, a life of 10 years, a maintenance cost of $32,000 per year, and an operating cost of $200 per day. Alternatively, the company can rent the necessary equipment for $1170 per day and hire a driver at $180 per day. If the company's MARR is 13% per year, how many days per year must the company need the equipment in order to justify its purchase? The company must need the equipment 56.66| days per year in order to justify Its purchase. When approached to rent for the breakeven number of days, the equipment owner indicated that the minimum rental is for 100 days per year, however, he might consider a lower daily rental cost. What is the daily rental cost to justify renting over purchasing? If the equipment was purchased, assume it would be used for the breakeven number of days. Determine the required rental cost per day. The dally rental cost to justify renting over purchasing is determined to be $ 622

Required information A land development company is considering the purchase of earth-moving equipment. This equipment will have an estimated first cost of $205,000, a salvage value of $85,000, a life of 10 years, a maintenance cost of $32,000 per year, and an operating cost of $200 per day. Alternatively, the company can rent the necessary equipment for $1170 per day and hire a driver at $180 per day. If the company's MARR is 13% per year, how many days per year must the company need the equipment in order to justify its purchase? The company must need the equipment 56.66| days per year in order to justify Its purchase. When approached to rent for the breakeven number of days, the equipment owner indicated that the minimum rental is for 100 days per year, however, he might consider a lower daily rental cost. What is the daily rental cost to justify renting over purchasing? If the equipment was purchased, assume it would be used for the breakeven number of days. Determine the required rental cost per day. The dally rental cost to justify renting over purchasing is determined to be $ 622

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)

10th Edition

ISBN:9781337902571

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter12: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 10P: Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6...

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Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6 years, and an estimated salvage value of 800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase- The replacement machine would permit an output expansion, so sales would rise by 1,000 per year; even so, the new machines much greater efficiency would cause operating expenses to decline by 1,500 per year The new machine would require that inventories be increased by 2,000, but accounts payable would simultaneously increase by 500. Dautens marginal federal-plus-state tax rate is 25%, and its WACC is 11%. Should it replace the old machine?
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