he purchase of a building it currently leases for $30,000 per year. The owner of the building put it up for sale at a price of $170,000, but because the firm has been a good tenant, the owner offered to sell it to RKE for a cash price
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ENGINEERING ECONOMY
- draw a cash flow diagram
RKE & Associates is considering the purchase of a building it currently leases for $30,000 per year. The owner of the building put it up for sale at a price of $170,000, but because the firm has been a good tenant, the owner offered to sell it to RKE for a cash price of $160,000 now. If purchased now, how long will it be before the company recovers its investment at an interest rate of 12% per year?
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- A manufacturing company leases a building for $100,000 per year for its manufacturing facilities. In addition, the machinery in this building is being paid for in installments of $20,000 per year. Each unit of the product produced costs $15 in labor and $10 in materials. The product can be sold for $40. what are the following 1. How many units per year must be sold for the company to breakeven? 2. If 10,000 units per year are sold, what is the annual profit? 3. If the selling price is lowered to $35 per unit, how many units must be sold each year for the company to earn a profit of $60,000 per year? 4. If the labor cost is increased by 10% and materials cost is increased by 5%, the number of units to break even is closest to:Corcoran Consulting is deciding which of two computer systems to purchase. It can purchase state-of-the-art equipment (System A) for $20,000, which will generate cash flows of $6,000 at the end of each of the next 6 years. Alternatively, the company can spend $12,000 for equipment that can be used for 3 years and will generate cash flows of $6,000 at the end of each year (System B). If the company’s WACC is 10% and both “projects” can be repeated indefinitely, which system should be chosen, and what is its EAA?Mary Graham worked as a real estate agent for Piedmont Properties for 15 years. Her annual income is approximately $100,000 per year. Mary is considering establishing her own real estate agency. She expects to generate revenues during the first year of $2 Million. Salaries paid to her employees are expected to total $250,000. To begin the business, Mary must borrow$500,000 from her bank at an interest rate of 15%. Equipment will cost Mary $50,000. At the end of one year, the value of this equipment will be $30,000, even though the depreciation expense for tax pursposes is only $5,000 during the first year. Determine the (pre-tax) accounting profit for this venture Determine the (pre-tax) economic profit for this venture. Which of the costs for this firm are explicit and which are implicit?
- Mary Graham worked as a real estate agent for Piedmont Properties for 15 years. Her annual income is approximately $100,000 per year. Mary is considering establishing her own real estate agency. She expects to generate revenues during the first year of $2 Million. Salaries paid to her employees are expected to total $250,000. To begin the business, Mary must borrow$500,000 from her bank at an interest rate of 15%. Equipment will cost Mary $50,000. At the end of one year, the value of this equipment will be $30,000, even though the depreciation expense for tax pursposes is only $5,000 during the first year. a. Determine the (pre-tax) accounting profit for this venture b. Determine the (pre-tax) economic profit for this venture. c. Which of the costs for this firm are explicit and which are implicit?Bob's Building Supplies produced $1 million worth of building supplies in 2017. Bob's $350,000 worth of these supplies in 2017 to the Custom Construction Company, which used them to produce mode homes worth $2 million in 2017. Bob's sold another $400,000 of these supplies in 2017 directly to homeowners, who undertook their own home improvements. Bob's sold the remaining supplies to Eco-Play Playgrounds, which used them to build $750,000 worth of playgrounds in 2018. Under the spending approach, how much did this economic activity contribute to 2017's GDP? A) $650,000 in building supplies, $2 million in housing, $750,000 in playgrounds B) $650,000 in building supplies, $2 million in housing, $0 in playgrounds C) $1 million in building supplies, $1,650,000 in housing, $0 in playgrounds D) $400,000 in building supplies, $1,650,000 in housing, $500,000 in playgrounds E) $400,000 in building supplies, $2 million in housing, $0 in playgrounds F) $400,000 in building supplies, $2…You want to save money on the down payment on your flat loan. You are planning to save for the next 5 years. During a year, you can accumulate a certain amount of money that you can invest at the end of the year for 3% annual interest rate. The present value of the property to be purchased is €70000. Prices for such flats rise by 12% per year. You want to buy a flat after 5 years with a down payment of 15% of its value. The administrative costs of purchasing are currently €1000, and increase by 5% each year. How much do you have to save each year to have enough money to cover down payment and administrative costs after 5 years, given that now is the beginning of the year? What if you can invest in the end of each month and interest is to be calculated monthly, how much do you have to save each month?
- A construction firm contemplating the purchase of construction equipment which has a choice between two different models. Equipment A will cost P 725, 050 while Equipment B will cost P 700, 500. The repairs required for each machine are as follows: Equipment A: P 10,000 at the end of 5th year. P 25,500 at the end of 10th year. Equipment B: P 34,500 at the end of 9th year. The machines are alike in all aspects. If this firm is earning 7.25% return in its capital, which equipment should be purchase? And what is the net savings? Justify your answer.Consider three investment plans at an annual rate of 9.38%. • Investor A: Invest $2000 per year for the first 10 years of your career. At the end of 10 years, make no further investments, but reinvest the amount accumulated at the end of 10 years for the next 31 years. • Investor B: Do nothing for the first 10 years. Then start investing $2000 per year for the next 31 years. • Investor C: Invest $2000 per year for the entire 41 years. Note that all investments are made at the beginning of each year, the first deposit will be .made at the beginning of age 25 (n=0), and you want to calculate the balance at age of 65 (n=41).A property owner is evaluating the following alternatives for leasing space in his office building for the next five years: Gross lease with expense stop and CPI adjustment. Rent will be $24 the first year and increase by the full amount of any change in the CPI after the first year with an expense stop at $9 per square foot. The CPI and operating expenses are followed: The CPI is expected to increase 5 percent per year. Expenses are estimated to be $9 during the first year and increase by $1 per year thereafter. Calculate the effective rent to the owner (after expenses) for the lease using a 10 percent discount rate. A) $21.60 B) $17.28 C) $22.46 D) $19.01 Give typing answer with explanation and conclusion
- A contractor has an excavator requiring repairs within her fleet of cquipment for executing projects. She is offered $6,000 for the equipment by another contractor but refuses to sell. Other financial details of the excavator are as follows: Repair cost of $4,000 Useful life of 5 years At the end of year 1, the operation and maintenance cost is pegged at $2.000. This value increases by $1,000, S1,200, S1,400, and $1,600 for the following years. At the end of year 1, the salvage value is pegged at $6,000. This value decreases by 25% for the following years. The minimum acceptable rate of return (MARR) is 12%. Due to the constant use and operation and maintenance required, determine how long this equipment should be kept by the contractor. N.B. SHOW THE DETAILED WORKINGS FOR EACH YEAR. DO NOT STOP AT YEAR AFTER THE ECONOMIC LIFE.Hw.146. Please set up an Excel spreadsheet, and show your work within the spreadsheet to complete the solution. 1. The demand for LED 60 Watt light bulbs sold at Home Depot can be shown by D(p) = -9p+750 where (p) is the quantity sold in hundreds and p is the price per bulb in dollars A. State the Revenue function for the LED bulbs. (Insert a text box in your spreadsheet.) B. Home Depot incurs fixed cost of $4000 and variable costs of .03 per bulb. Home Depot knows that to be competitive the bulbs must not exceed a price of $9.00 each. How much should the bulbs be sold so that Home Depot breaks even? C. What is Home Depots profit if it sells the bulbs for $7.50 each“The higher the MARR, the higher the price that a company should be willing to pay for equipment that reduces annual operating expenses.” Do you agree with this statement? Explain your answer.