04.An investment of P135 000.00 is being considered for a new lathe machine.Eslimated economic life of the lathe is 12 years with a salvage value of P10 000.00.Projected annual income and expenses for the investment are P80 000.00 and P30000.00, respectively. Using an MARR af 15% compounded annually and applying PWanalysis, determine if the lathe should be purchased.(Ans. Purchase is justified, P137 900.00)05. A mining company is offered a 9-year loase for a coal mine at a cost of P120M, Theengineers estimate the company will be able to mine 15 000 tons/yr for the first fouryears and 22 500 tons/yr for the next five years. Operating costs is computed atP1250/ton, while the price of coal is P275óton. If the company requires a 12%minimum rate of return on its investment, determine if the offer should be considered.Apply PW analysis.(Ans. offor should be accepted, P25,68M)06. J. Timberlake Corporation needs a special manufacturing machine for its productionplant. The company may purchase the machine for P500 000.00 and have it installedat a cost of P50 000.00. The machine will incur an annual cost of P35 000.00 formaintenance and repair, and is expected to be used for eight years and then sold forP50 000.00. The company may also rent the machine at P115 000.00 per yearpayable at the end of each year. If the machine is rented, costs of installation andrepair shall be shouldered by the lessor, however, a fee of P20 000.00 per vearpayable at the end of each year will be charged for basic maintenance, If thecompany requires an 11% MARR on its investments, determine the better alternativeusing PW analysis.(Ans. It is advantageous to rent, - P694 726.57; – P708 417.97) ME Board Exam October 199701.A company puts P25 000.00 down and will pay P5000.00 every year for the life of amachine for 10 years. If the salvage value is zero and the interest rate is 10%compounded annually, what is the present value of the machine?(Ans:- P55 723.00)An electric generator is purchased for P80 000.00, it is expected to be used for fiveyoars, and then sold for P15 000.00. Annual operating and maintenance costs areestimated at P20 000.00. Using a discount rate of 10%, determine the present worthof the investment.02.(Ans. - P146 502.00)03. CE Board Exam November 1999To maintain its newly acquired equipment, the company needs P40 000.00 per yearfor the first five years and P60 000.00 per year for the next five years. In addition, anamount of P140 000.00 would also be needed at the end of the fifth and the eighthyears. At 6% interest, what is the present worth of these costs?(Ans. - P549 812.00)

Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only one…

A company puts P25 000.00 down and will pay P5000.00 every year for the life of a machine for 10 years. If the salvage value is zero and the interest rate is 10% compounded annually, what is the present value of the machine? (Ans.- P55 723.00)

A company puts P25 000.00 down and will pay P5000.00 every year for the life of a machine for 10 years. If the salvage value is zero and the interest rate is 10% compounded annually, what is the present value of the machine? (Ans.- P55 723.00)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A laboratory might buy a new piece of equipment for $26,785. The equipment's useful life is 4 years, and its salvage value is $5000. The company will save $9000 per year for 4 years if it buys the equipment. Maintenance costs in year 1 will be zero, but will increase each year starting in year 2 by $500 per year (the first year is covered by a warranty). Determine the Equivalent Annual Worth if the company's cost of money is 10%.
A company is considering purchasing a machine for P210,000. The machine will generate an after-tax net income of P20,000 per year. Annual depreciation expense would be P15,000. What is the payback period for the new machine? Group of answer choices 10.5 years. 6 years. 42 years. 4 years. 14 years.
The company buys a solar panel unit for P105,000. The shipping and installation fees amount to P15,000. If the unit is expected to last for 15 years, with a salvage value of P3,000, what is the depreciation charge during the 12 th year, and the book value at the end of 14 years by the (a) Declining balance method, (b) DDB method, (c) sinking fund method g iven interest rate at 12.5 percent, and (d) Sum-of-the-Years Digit (SYD) Method.
One member of a company proposed to buy a machine for P200,000. The expected service life is 20 years with no salvage value. What is the capitalized cost if the machine is kept in service indefinitely? The interest rate is 10%.
6. A contractor can buy dump trucks for P800,000.00 each(surplus) or rent them for P1,189 per truck per day. The truck has a salvage value of P100,000 at the end of its useful life of 5 years. Annual cost of maintenance is P20,000.00. If money is worth 14% per annum, determine the number of days per year a truck must be used to warrant the purchase of the truck. A. 200. B. 199 C. 145 D. 102
A company buys a solar panel unit for P105,000. The shipping and installation fees amount to P15,000. If the unit is expected to last for 15 years, with a salvage value of P3,000, what is the depreciation charge during the 12 th year, and the book value at the end of 14 years by the (c) sinking fund method given interest rate at 12.5 percent, and (d) Sum-of-the-Years Digit (SYD) Method.
A proposal is made to buy a machine for $3,00,000. The expected service life is twenty years with zero salvage value. What is most nearly the capitalized cost if the machine is kept in service indefinitely? The interest rate is 8%.
A company is planning to acquire a machine costing K500,000. Effective life of the machine is 5 years. The company is considering two options. One is to acquire the machine through leasing and the other is by borrowing K500,000 from its bankers at 10% p.a. simple interest. The principal amount of the loan will be paid in 5 equal annual instalments. The machine will be sold at K50,000 at the end of 5th year. The following is further information: a) Principal, interest, lease rentals are payable on the last day of each year. b) The machine will be fully depreciated over its effective life. c) Tax rate is 30% and after tax cost of capital is 8%. REQUIRED: Compute the lease rentals payable which will make the firm indifferent to the loan.
A new machine will cost P17000 and will have an estimated salvage value of P11000 in five years. Special tools for the new machine will cost P5000 and will have a resale value of P2500 at the end of five years. Maintenance costs are estimated at P200 per yr. What will be the average annual cost of ownership during the next five years if interest is 6%?
A piece of equipment has a first cost of $75000, a maximum useful life of 4 years, and a market (salvage) value described by the relation Sk = 60000 – 10500k, where k is the number of years since it was purchased. The AOC series is estimated using AOC= 30000 + 4500k. The interest rate is 9% per year. When should the company replace this asset?
A construction company can purchase a used backhoe for $90,000 and spend $450 per day in operating costs. The equipment will have a 5-year life with no salvage value. Alternatively, the company can lease the equipment for $800 per day. How many days per year must the company use the equipment in order to justify its purchase at an interest rate of 8% per year
(CLO-7) Company would like to buy a machine in 2021. The life of the machine is 15 years with salvage value 10000 AED. Also the book value of the machine ater 5 years mostly 100000 AED what is the basis cost of this machine

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