If the first cost of an asset is $15,000, and an annual operating cost of $5000 with a salvage value of S3000 after 5 years. What will be the Annual worth and the Capital recovery. If i= 10% O AW -S-8465 and CR- S+4508 O AW S-8465 and CR-S-4508 O AW =S+4508 and CR= $-8465 O AW-S-4508 and CR S-8465
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- REPLACEMENT CHAIN The Lesseig Company has an opportunity to invest in one of two mutually exclusive machines that will produce a product the company will need for the next 8 years. Machine A costs 8.9 million but will provide after-tax inflows of 4.5 million per year for 4 years. If Machine A were replaced, its cost would be 9.8 million due to inflation and its cash inflows would increase to 4.7 million due to production efficiencies. Machine B costs 13.9 million and will provide after-tax inflows of 4.3 million per year for 8 years. If the WACC is 9%, which machine should be acquired? Explain.V2. A taxi operator purchased a new unit with a down payment of P400 000.00 and monthly payments of P12 500.00 for the next three years. The unit is expected to be used for eight years and will be sold for P40 000.00 after that time. The estimated net monthly income from the unit (depreciation included) is P25 000.00 for the first five years and P22 000.00 for the last three years. Determine (a) the payback period; (b) the future worth of the investment for an interest rate of 18% compounded monthly. (ANSWER: 32 months, P2.077M)7) Consider the following information: Asset Cost $56,000Salvage value 1,000Life 10 yearsDepreciation method Straight Line a. What is the depreciation in year 3? b. What would the depreciation in year 4 be if at the beginning of the year we think that the total asset life will be only 8 years instead of 10 years?
- 2.5 points Durley Company plans to buy a new machine for $60,000 that will have an estimated useful life of 3 years and no salvage value. The expected cash inflow is $24,000 annually. Durley Company has a cost of capital of 12 %. Given that the present value of $1 after 3 periods at 12 % is 0.71178, and the present value of an annuity for 3 periods at 12% is 2.40183 , the profitability index is: 0.28 0.04 0.96 1.04 1.96QUESTION TWO (2) Frank limited is considering buying a new machine which would have a useful life of 5 years at a cost of Gh¢ 100,000 and scrap value of Gh¢ 5,000. The machine will produce 50,000 units per annum of a new product with an estimated selling price of Gh¢3 per unit. Direct cost would be Gh¢ 1.75 per unit and annual fix cost including depreciation calculated on a straight line method would be Gh¢ 40,000. p.a. In years 1 and 2, special sales promotion expenditure, not included in the above costs would be incurred amounting to Gh¢ 10,000 and GH¢ 15,000 respectively. As a consequence of this project, investment by the company on debtors and stocks would increase during year 1 by Gh¢ 15,000 and Gh¢ 20,000 respectively and creditors would increase by Gh¢ 10,000 and would revert to their previous levels. Requirement Evaluate the project using the N.P.V method of investment appraisal, assuming the cost of capital…6a) Morison Cars Inc. has a new project with a cost of $480,000 and annual cash flows of $154,000 for 5 years. The cost of capital for the project is 15%. Calculate (i) net present value, (ii) discounted payback period, (iii) profitability index. Make a decision in each case and at the end (assume a benchmark period of 3.61 years).
- Q1 A company is considering an investment proposal which has in investment outlay of RO 50,000. The project has a life of 5 years with a salvage value of RO 4,000. The Project is expected to generate profit after tax (PAT) of RO 5,000, RO 8,000, RO 9,000, RO 8,000 and RO 7,000 at the end of year 1, 2, 3, 4 and 5 respectively. Advice whether the project is good for investment, using ARR technique if if the minimum expected rate of return is 15%.4. A project capitalized for ₱150,000 invested in depreciable assets will earn a uniform, annual income of ₱59, 547 in 10 years. The costs for operation and maintenance total ₱27,000a year, and taxes and insurance will cost 4% of the first cost each year. If the company expects its capital to earn12% before income taxes, is the investment worthwhile? Show by: Present worth method. Solve and show the soulution.Question 5 Bunnings Ltd is considering to invest in one of the two following projects to buy a new equipment. Each equipment will last 5 years and have no salvage value at the end. The company’s required rate of return for all investment projects is 8%. The cash flows of the projects are provided below. Equipment 1 Equipment 2 Cost $186,000 $195,000 Future Cash Flows Year 1 Year 2 Year 3 Year 4 Year 5 86 000 93 000 83 000 75 000 55 000 97 000 84 000 86 000 75 000 63 000 Required: Identify which option of equipment should the company accept based on Profitability Index? Identify which option of equipment should the company accept based on discounted pay back method if the payback criterion is maximum 2 years?
- ECONOMICS A machine cost P 1,800,000.00. It has a salvage value of P 300,000.00 at the end of 5 years. If money is worth 6% annually. Determine the depreciation charge during the 3" year and the book value at the end of 3 years by the: (a) Straight Line Method (b) Sinking Fund Method (c) Declining Balance Method (d) Double Declining Balance Method (e) Sum-of-the-Year-Digits MethodOn 1/1/2020 you have purchased an asset with for $50,000. You estimate the useful life to be 5 years and the salvage value to be $10,000. A) Using straight line depreciation, fill in the estimated depreciation schedule below. B) Now using accelerated depreciation (1.5X declining balance), fill in the estimated depreciation schedule below. C) On 12/31/2020 which method will report more net income, and by how much? Assume the tax rate is 40%. D) Assume that on 1/1/2021, you choose to sell the asset. You receive 40,000 in cash. Report the gain or loss under each depreciation method. (Circle one and Fill in the blank) Straight Line Depreciation: GAIN or LOSS Amount: 1.5X Accelerated Depreciation: GAIN or LOSS Amount:An asset cost $200,000. It has a salvage value of $40,000. It has a 10 year life. What would accumulated depreciation be at the end of three years assuming straight line depreciation? Group of answer choices $60,000 $40,000 $48,000 $160,000
