5) The First cost of a passenger bus is P800,000. Its estimated life is 4 years with no salvage value. The operating cost per year of 300 days of operation are as follows: Tires, P24,000; gasoline, 60 liters per day at P15 per liter: Oil, P80 per day: maintenance and repair, P40,000; labor P800 per day: miscellaneous expense, P18,000; depreciation, sinking fund at 10%. If the average passenger fare is P3.50 for each passenger one way and expected profit or return is 15% determine the minimum average number of passengers that should be transported each day. Use the a) AW method and b) Future worth method.
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- Tanaka Industrial Systems Company is trying to decide between two different conveyor belt systems. System A costs $275,000, has a 4-year life, and requires $81,000 in pretax annual operating costs. System B costs $355,000, has a 6-year life, and requires $75,000 in pretax annual operating costs. Both systems are to be depreciated straight-line to zero over their lives and will have zero salvage value. Suppose the company always needs a conveyor belt system; when one wears out, it must be replaced. Assume the tax rate is 22 percent and the discount rate is 9 percent. Calculate the EAC for both conveyor belt systems.Peabody Corporation has the following base-case estimates for its new smallengine assembly project:• Price per un it= $500• Variable costs = $120 per unit• Fixed costs = $2.5 million• Demand = 20,000 units per year• Capital investment = $8 million a1 year 0• Product life = 8 years• Salvage value = $500,000• Depreciation method =seven-year MACRS• Tax rate= 35%• MARR = l2%Suppose the company believes that all of its estimates (except the product life, depreciation method, tax rale, and MARR) are accurate only 10 within ±20%.(a) What is the NPW of the project based on its base-case scenario?(b) What is the NPW of the project based on its best-case scenario?(c) What is the worst-case scenario?(d) What conclusion would you make about the project after seeing the scenario analyses?A chemical plant worth P 110M has an estimated life of 6 years and a projected scrap value of P 10M. after 3 years of operation an explosion made it a total loss. How much money would have to be raised to put up a new plant costing P 150M, if depreciation reserved had been maintained during its 3 years of operation by Straight Line method?
- n Project A Project B 0 -$7,000 -$5,000 1 -$2,500 -$2,000 2 -$2,000 -$2,000 3 -$1,500 -$2,000 4 -$1,500 -$2,000 5 -$1,500 -$2,000 6 -$1,500 -$2,000 7 - -$2,000 8 - - Suppose projects A and B are mutually exclusive. The required service period is 8 years and comparable equipment will be leased for $3,000 per year payable at the end of each year for the remaining years of the required service period. Which project is a better choice at 15%? Use PW(15%) criterion and show your equation with numbers plugged into factors and your numerical result for each option.Calumet Electronics purchased a device for $75,000 four years ago (existing device). The company is considering purchasing a new device, that will cost $92,000. Assume the company has a MARR of 12% per year, compounded annually. The new device can be purchased for $92,000 with annual operating and maintenance expenses of $1,184 per year. At the end of 4 years, the company can sell the new device for $45,678. The new device also requires a one-time expense of $2,791 at the end of year 4 to install new software prior to selling it. What is the equivalent uniform annual cost of the new device if it is kept in service for 4 years?A food processing plant consumed 450,000 kW of electric energy annually and pays an average of P2.00 per kWh. A study is being made to generate its own power to supply the plant the energy required, and that the power plant installed would cost P2,000,000. Annual operation and maintenance, P800,000. Other expenses P100,000 per year. Life of power plant is 15 years; salvage value at the end of life is P200,000; annual taxes and insurances, 4% of first cost; and rate of interest is 14%. What is the rate of return? Is the power plant justifiable?
- Chanveida finds a home listed for $48k. Similar homes in good condition sell for $60k (market value). She pays $35k. Closing costs are $2k, estimated fix-up is $7k, and holding costs are $3k. She ‘flips’ the property after 3 months for $58k. Her closing costs upon sale are 7% of the sell price. Her overall tax rate is 30%. Assume no financing is used and there is no depreciation taken. Determine the Adjusted Cost Basis. (Do not show a decimal or cents in your answer)You purchased a CNC machine for $50,000. It is expected to have a useful life of 8 years and a salvage value of $4,000. At i = 12%, what is the annual capital cost of this machine?An equipment was purchased now at P10,000,000.00 prevailing interest rate is 10% per year. Solve the following cases capitalized cost: Solve for case 2 if the machine on item 1.1 is to be replaced every end of 10 years at 10% worth of money. Salvage cost is zero.
- The following pair of assets differ only in the MARR. The problem asks you to determine the effect of this difference on the economic life and to explain the result. All assets decline in value by 20 percent of current value each year. Installation costs are zero for all assets. Further data concerning the four pairs of assets are given in the table that follows. Asset First Cost Initial Operating Cost Rate of Operating Cost Increase MARR A $120,000 $30,000 12.5% 5% B $120,000 $30,000 12.5% 25% a. Determine the economic lives for assets A and B. The economic life of asset A is (enter your response here) years, and the economic life of asset B is (enter your response here) years. b. Create a diagram showing the EAC(capital), the EAC(operating), and the EAC(total) for assets A and B. c. Explain the difference in economic life between A and B.You are evaluating two different silicon wafer milling machines. The Techron I costs $228,000, has a three-year life, and has pretax operating costs of $59,000 per year. The Techron II costs $400,000, has a five-year life, and has pretax operating costs of $32,000 per year. For both milling machines, use straight-line depreciation to zero over the project’s life and assume a salvage value of $36,000. If your tax rate is 24 percent and your discount rate is 8 percent, compute the EAC for both machines. Note: Your answer should be a negative value and indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.(Show the cashflow diagram if needed) A project is estimated to cost P100,000, lasts 8 years, and have a P10,000 salvage value. The annual gross income is expected to average P24,000 and annual expenses, excluding depreciation, will total P6,000. If capital is earning 10% before income taxes, determine if this is a desirable investment using PWM and FWM.