Two methods can be used to produce expansion anchors. Method A costs $80,000 initially and will have a $15,000 salvage value after 3 years. The operating cost with this method will be $30,000 in year 1, increasing by $4000 each year. Method B will have a first cost of $120,000, an operating cost of $8000 in year 1, increasing by $6500 each year, and a $40,000 salvage value after its 3-year life. At an interest rate of 12% per year, which method should be used on the basis of a present worth analysis?

The table given below lists the relevant cost items for a specific system purchase. The operating expenses for the new system are $10,000 per year, and the useful life of the system is expected to be five years. The salvage value for depreciation purposes is equal to 25% of the hardware cost. Cost Item Cost Hardware $160,000 Training $15,000 Installation $15,000 a) What is the Book Value (BV) of the device at the end of year three if the Straight Line (SL) depreciation method is used? b) Suppose that after depreciating the device for two years with the SL method, the firm decides to switch to the double declining balance depreciation method for the remainder of the device's life (the remaining three years). What is the device's BV at the end of four years?

A semi-tractor costs $230,000. The driver of the truck plans to use the truck for 4 years, after which point it will have a salvage value of $35,000. The cost to operate and maintain the truck each year is $10,000. If the driver has a MARR of 6%, what is the capital recovery cost of the semi-tractor?

Consider an order delivery business that will be a 5-year project. The required net working capital is $6.6 million and it will be returned at the end of the life of the project. Required equipment (net capital spending) will cost $15 and it will be depreciated straight-line to 0 over the 5-year life of the project. The business will have sales of $3 million in year 1, $6 million in year 2, and $10 million in years 3, 4, and 5. Costs are 30% of sales and the tax rate is 20%. (If there is a loss at the EBIT line, assign taxes of 0 for that year and do not carry tax losses forward.) The equipment has no salvage value. Create an income statement for years 1, 2, and 3, 4, and 5 (3, 4, and 5 will have the same income statement). Use the information from the income statement to calculate the operating cash flow using EBIT + depreciation – taxes for each year. Put all cash flows (net working capital, net capital spending, and operating cash flows) on a timeline. Using total cash flows from…