Exercise 6-17A (Algo) Asset replacement-opportunity cost LO 6-5 Thornton Freight Company owns a truck that cost $36,000. Currently, the truck's book value is $27,000, and its expected remaining seful life is five years. Thornton has the opportunity to purchase for $26,000 a replacement truck that is extremely fuel efficient. F ost for the old truck is expected to be $5,000 per year more than fuel cost for the new truck. The old truck is paid for but, in spite eing in good condition, can be sold for only $18,000. equired alculate the total relevant costs. Should Thornton replace the old truck with the new fuel-efficient model, or should it continue to L he old truck until it wears out? Answer is complete but not entirely correct. Keep Old Replace With New
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- Exercise 6-17A (Algo) Asset replacement-opportunity cost LO 6-5 Thornton Freight Company owns a truck that cost $36,000. Currently, the truck's book value is $27,000, and its expected remaining useful life is five years. Thornton has the opportunity to purchase for $26,000 a replacement truck that is extremely fuel efficient. Fuel cost for the old truck is expected to be $5,000 per year more than fuel cost for the new truck. The old truck is paid for but, in spite of being in good condition, can be sold for only $18,000. Required Calculate the total relevant costs. Should Thornton replace the old truck with the new fuel-efficient model, or should it continue to use the old truck until it wears out? Answer is not complete. Keep Old Total relevant costs Should Thornton replace or continue the old truck? Return to question Replace With New Replace the old truck.Paragraph Styles Ad 4. Asset Replacement Decision Birch Company owns a piece of equipment that cost $95,000, Currently, the equipment's book value is $43,000 and its expected remaining useful life is four years. The salvage value of the truck in 4 years is expected to be $20,000. Birch has the opportunity to purchase for $108,000 replacement equipment that is extremely efficient. In four years, the new equipment would have a salvage value of $75,000. Maintenance cost for the old equipment is expected to be $5,500 per year and maintenance on the new equipment is expected to be $2,500 per year. The old equipment is paid for but, in spite of being in good condition, can be sold for only $34,400 currently. Should Birch replace the old equipment with the new efficient equipment, or should it continue to use the old equipment until it wears out? Include your calculations with your answer. unour Answer:Exercise 13-17A (Algo) Asset replacement decisions-opportunity cost LO 13-5 Jordan Freight Company owns a truck that cost $42.000 Currently, the truck's book value is $22,000, and its expected remaining useful life is five years. Jordan has the opportunity to purchase for $30100 a replacement truck that is extremely fuel efficient. Fuel cost for the old truck is expected to be $5,600 per year more than fuel cost for the new truck. The old truck is paid for but, in spite of being in good condition, can be sold for only $10,000 Required Calculate the total relevant costs. Should Jordan replace the old truck with the new fuel-efficient model, or should it continue to use the old truck until it wears out? Total relevant costs Should Jordan replace or continue the old truck? Keep Old Replace the old truck Replace With New
- 23 Not yet anwered Points out of 3.00 Pgquestion A contractor has purchased a wheel loader for $115,000 and plans to use it 2,000 hours per year. The cost of one set of tires is $25,000. At this usage rate, the contractor anticipates disposing of the loader after using it for 10 years and realizing a salvage value of $35,000. The flywheel horsepower rating of the loader's diesel engine is 105 horsepower. The interest rate is 10%. The loader operator will earn $34.00 per hour including fringe benefits, and diesel fuel costs $1.20 per gallon. How much is the contractor's hourly ownership cost for the loader if using time value of money analysis? Select one: O a. $8.27/hr Ob. $9.37/hr Oc $7.34/hr O d. $6.23/hr12.2 Muddy Fields Earthmoving can purchase a bull- dozer for $30,000. After 7 years of use, the bull- dozer should have a salvage value of $5000. (1) Under MACRS, what depreciation is claimed in year 3? Under the straight-line (pre-1981) method, what depreciation is claimed in year 3? Under the SOYD (pre-1981) method, what depreciation is claimed in year 3?11 DeCento's is analyzing two mutually exclusive machines to determine which one it should purchase. Whichever machine is purchased, it will be replaced at the end of its useful life. The company requires a return of 15 percent and uses straight-line depreciation to a zero book value over the life of the machine. Machine A has a cost of $386,000, annual operating costs of $29,000, and life of 4 years. Machine B costs $257,000, has annual operating costs of $19,000, and a life of 3 years. The firm currently pays no taxes. Which machine should be purchased?
- Reference: Case Study S Dunn Manufacturing is considering the following two alternatives. The cost information for the two proposals for replacing an equipment are provided are in table below. Initial cost Benefits/year Machine X $120,000 $20,000 for the first 10 years and $9,000 for the next 10 years Life Salvage value $40,000 MARR 5.2. The NPW of machine X is A) $35,158 B) $48,192 C) $50,752 Machine Y $96,000 $12,000 per year for 20 years. 20 years 8% $20,000Original Machine Sinitial cost = 94210 SAnnual depreciation = 10876 SPurchased 5 years ago SBook Value = 40321 Salvage today = 44139 Salvage in 5 years = 7684 •New Machine Sinitial cost = 200000 $5-year life Salvage in 5 years = 0 SCost savings = 80000 per year 53-year MACRS depreciation •Required return = 15% •Tax rate = 38% Shall we go and buy the new machine? submit the solution on ExcelTitle 12.1 Metal Stampings, Inc., can purchase a new forging machine for $400,000. After 20 years of use,... Description 12.1 Metal Stampings, Inc., can purchase a new forging machine for $400,000. After 20 years of use, the forge should have a salvage value of $25,000. (a) Under MACRS, what depreciation is claimed in year 3? Under the straight-line (pre-1981) method, what depreciation is claimed in year 3? (Answer: a. $69,960; . $18,750)
- QUESTION 4 SFM: A construction company decided to purchase a concrete mixer truck for $75,000 with a trade-in of their old mixer. The old mixer has a trade-in value of $20,000. The new mixer will be kept for 10 years before being sold. Its estimated salvage value at that time is expected to be $5,000. Assume interest to be 12%. Determine the 7th year BVB by Sinking Fund Method.Rework Example 7-21 using the MACRS depreciation method (assume three-year property class) instead of the SL depreciation method 7-21. A new municipal refuse collection vehicle can be purchased for $84,000. Its expected useful life is 6 years, at which time the market value and book value will be zero. Before-tax cash flow (BTCF) will be +$18,000 per year over the 6-year life of the vehicle. (7.9) a. Use straight-line depreciation, an effective income tax rate of 40% and an after-tax MARR of 12% to determine the present worth of the investment. b. What is the after-tax internal rate of return? c. Is this vehicle a sound investment? Explain your answer.Q/ A contractor purchase an equipment with a delivered price of (750000$) to operate it in one of his projects. He estimate the cost of this equipment according to the following justification - Total interest rate (including bank interest, storage, insurance, .) =15 % Consumption of (oil, fuel, and grease) =(8.25 S/hr) - Cost of maintenance and repair = 60% of the annual straight line depreciation - salvage value = 150000 S Useful life = (10 years) with (1400 hours used per year). a- Determine the probable cost per hour according to the previous justification. b- After (7 years) of operating the equipment, the contractor recorded all the costs of the equipment as shown in the table blow. He notice the increment in the average consumption and maintenance in the last two years (the 6", and 7th years). Calculate the average cost per hour of the equipment for the first five years, according to the salvage value of the equipment at the end of the 5th year = (200000$). Fuel oil Grease…