Business, 16.11.2019 05:31 jaeybird9

Acompany is considering buying a new piece of machinery. a 10% interest rate will be used in the computations. two models of the machine are available.

machine i

initial cost: $80,000

end -of -useful –life salvage value, s: 20,000

annual operating cost 18,000

useful life, in years 20

machine ii

initial cost: $100,000

end -of -useful –life salvage value, s: 25,000

annual operating cost: 15,000 first 10 years, 20,000 thereafter

useful life, in years: 25

(a) determine which machine should be purchased, based on equivalent uniform annual cost.

(b) what is the capitalized cost of machine i?

(c) machine i is purchased and a fund is set up to replace machine i at the end of 20 years. compute the required uniform annual deposit.

(d) machine i will produce an annual saving of material of $28,000. what is the rate of return if machine i is installed?

(e) what will be the book value of machine i after 2 years, based on sum -of -years' -digits depreciation?

(f) what will be the book value of machine ii after 3 years, based on double declining balance depreciation?

Answers: 2

Show answers

Answers

Answer from: jayzelgaspar8005

Machine I

capitalized cost: 230,271.28

EAC: $ 27,047.58

Machine II

EAC: $ 27,377.930

As Machine I cost per year is lower it is better to purchase that one.

Annual deposits to purchase Machine I in 20 years: $ 1,396.770

return of machine I with savings of 28,000 per year: 10.51%

Explanation:

WE calculate the present worth of each machine and then calculate the equivalent annual cost:

MACHINE 1

Operating cost:

$C \times \frac{1-(1+r)^{-time} }{rate} = PV\\$

C18,000

time20

rate0.1

$18000 \times \frac{1-(1+0.1)^{-20} }{0.1} = PV\\$

PV$153,244.1470

Salvage value:

$\frac{Maturity}{(1 + rate)^{time} } = PV$

Maturity $20,000.0000

time 20.00

rate 0.1

$\frac{20000}{(1 + 0.1)^{20} } = PV$

PV 2,972.87

Total: -80,000 cost - 153,244.15 annual cost + 2,972.87 salvage value:

Total: 230,271.28

$PV \div \frac{1-(1+r)^{-time} }{rate} = C\\$

Present worth $(230,271.28)

time20

rate0.1

$-230271.28 \div \frac{1-(1+0.1)^{-20} }{0.1} = C\\$

C-$ 27,047.578

Fund to purchase in 20 years:

$FV \div \frac{(1+r)^{time} -1}{rate} = C\\$

FV $80,000.00

time20

rate0.1

$80000 \div \frac{(1+0.1)^{20} -1}{0.1} = C\\$

C $ 1,396.770

IF produce a 28,000 savings:

we must solve using a financial calcualtor for the rate at which the capitalized cost equals 28,000

$PV \div \frac{1-(1+r)^{-time} }{rate} = C\\$

PV $230,271.28

time20

rate0.105126197

$230271.28 \div \frac{1-(1+0.105126197287798)^{-20} }{0.105126197287798} = C\\$

C $ 28,000.000

rate of 0.105126197 = 10.51%

Machine II

100,000 cost

25,000 useful life

15,000 operating cost during 10 years

20,000 for the next 15 years

Present value of the operating cost:

$C \times \frac{1-(1+r)^{-time} }{rate} = PV\\$

C15,000

time10

rate0.1

$15000 \times \frac{1-(1+0.1)^{-10} }{0.1} = PV\\$

PV$92,168.5066

$C \times \frac{1-(1+r)^{-time} }{rate} = PV\\$

C20,000

time15

rate0.1

$20000 \times \frac{1-(1+0.1)^{-15} }{0.1} = PV\\$

PV$152,121.5901

in the timeline this is at the end of the 10th year we must discount as lump sum for the other ten years:

$\frac{Maturity}{(1 + rate)^{time} } = PV$

Maturity $152,121.5901

time 10.00

rate 0.1

$\frac{152121.590126167}{(1 + 0.1)^{10} } = PV$

PV 58,649.46

salvage value

$\frac{Maturity}{(1 + rate)^{time} } = PV$

Maturity $25,000.0000

time 25.00

rate 0.1

$\frac{25000}{(1 + 0.1)^{25} } = PV$

PV 2,307.40

Total cost: 100,000 + 92,168.51 + 58,649.46 - 2,307.40 = $248,510.57

$PV \div \frac{1-(1+r)^{-time} }{rate} = C\\$

PV $248,510.57

time25

rate0.1

$248510.57 \div \frac{1-(1+0.1)^{-25} }{0.1} = C\\$

C $ 27,377.930

Answer from: Quest

Amuscle thats keeping you from having pain.

Answer from: Quest

the correct answer is d. wealthy colonists to take care of the less fortunate. hope this

Another question on Business

Business, 22.06.2019 11:20

Security a has a higher standard deviation of returns than security b. we would expect that: (i) security a would have a risk premium equal to security b. (ii) the likely range of returns for security a in any given year would be higher than the likely range of returns for security b. (iii) the sharpe ratio of a will be higher than the sharpe ratio of b. (a) i only (b) i and ii only (c) ii and iii only (d) i, ii and iii

Answers: 1

Answer

Business, 22.06.2019 19:10

According to the textbook chapter, “the emotional connection of distinguishing differences and conflict”, which of the following groups of terms describes best the skills/resources that managers need when managing differences in their organization? energy, commitment, tolerance, and appreciation energy, adequate funding, tolerance, and appreciation funding, tolerance, a strong hr department, and tolerance energy, a strong hr department, patience, and strong leadership skills

Answers: 3

Answer

Business, 22.06.2019 20:00

What is the difference between total utility and marginal utility? a. marginal utility is subject to the law of diminishing marginal utility while total utility is not. b. total utility represents the consumer optimum while marginal utility gives the total utility per dollar spent on the last unit. c. total utility is the total amount of satisfaction derived from consuming a certain amount of a good while marginal utility is the additional satisfaction gained from consuming an additional unit of the good. d. marginal utility represents the consumer optimum while total utility gives the total utility per dollar spent on the last unit.

Answers: 3

Answer

Business, 22.06.2019 20:30

The smelting department of kiner company has the following production and cost data for november. production: beginning work in process 3,700 units that are 100% complete as to materials and 23% complete as to conversion costs; units transferred out 10,500 units; and ending work in process 8,100 units that are 100% complete as to materials and 41% complete as to conversion costs. compute the equivalent units of production for (a) materials and (b) conversion costs for the month of november.

Answers: 3

Answer

You know the right answer?

Acompany is considering buying a new piece of machinery. a 10% interest rate will be used in the com...

Questions