Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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- Reyarrow_forwardEsquire Company needs to acquire a molding machine to be used in its manufacturing process. Two types of machines that would be appropriate are presently on the market. The company has determined the following: Machine A could be purchased for $11,000. It will last 10 years with annual maintenance costs of $400 per year. After 10 years the machine can be sold for $1,155. Machine B could be purchased for $10,000. It also will last 10 years and will require maintenance costs of $1,600 in year three, $2,000 in year six, and $2,400 in year eight. After 10 years, the machine will have no salvage value. Required: Assume an interest rate of 8% properly reflects the time value of money in this situation and that maintenance costs are paid at the end of each year. Ignore income tax considerations. Calculate the present value of Machine A & Machine B. Which machine Esquire should purchasearrow_forwardA "standard" model of a dozer costs $20,000 and has an annual operating expense of $450. The dozer will be replaced in 6 years when the salvage value is expected to be $2,000. A "super" model can be purchased for $25,000, but will have a salvage value of $7,000 when retired in 6 years. Its operating expenses are also $450 a year. The purchaser's other investment opportunities are 5%. Compare these alternatives by using the annual equivalent method.arrow_forward
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