Nelson, Inc. is considering investing in new and more efficient equipment The equipment has 10-year life with the first cost of $800,000. The annual operating cost is $40,000 in year one and increases by $20,000 per year. The salvage value expected to be $50,000 and Nelson's MARR is 10%.
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- 7 An equipment’s cost is P50,000 with an economic life of 10 years. The equipment can be sold at P5,000 after 10 years. At what price can the equipment be sold after 5 years. (a) Using Straight line Method. (b) Using Sum of the years digit method. (c) Using Double Declining Balance Method (d) Using Declining Balance Method (e) Using Sinking Fund at 5%.4 QUESTION 9 A new production system for a factory is to be purchased and installed for $153,484. This system will save approximately 300,000 kWh of electric power each year for a 4year period. Assume the cost of electricity is $0.10 per kWh, and factory MARR is 10% per year, and the salvage value of the system will be $8,496 at year 4 Calcutate the FW of the above investment and insert the result below.What is net future value for a project with MARR 10% and cash flows of: year 0: -200; year 1: $50; Year 2: $50; year 3: $50; year 4: -$100; year 5: $400; year 6: $400.
- Methods of Economy Studies An investment of P 250,000 can be made in a project that will produce a uniform annual revenue of P 192,800 for 5 years and then have a salvage value of 10% of the first cost. Operation and maintenance will be P 72,000 per year. Taxes and insurance will be 4% of the first cost per year. The company expects capital to earn 20% before income taxes. Show whether or not the investment is justified economically using1. Present Worth (PW) method2. Future Worth (FW) method3. Annual Worth (AW) method4. Rate of Return (ROR) method5. Payback (Payout) methodEngineering economy - ENGR 3322 The International Parcel Service has installed a new radio frequency identification system to help reduce the number of packages that are incorrectly delivered. The capital investment in the system is $65,000, and the projected annual savings are tabled below. The system’s market value at the EOY five is negligible, and the MARR is 18% per year. Calculate the payback period of the project. a. 2 years b. 3 years c. 4 years d. None of the choicesAn investment of P 270,000 can be made in a project that will produce a uniform annual revenue of P 185,400 for 5 yrs and then have a salvage value of 10% of the investment. Out of pocket costs for operation and maintenance will be P 81,000 per year. Taxes and insurance will be 4% of the first cost per year. The company expects capital to earn not less than 25% before income taxes. Is this a desirable investment?
- 1. The Present Worth Method A project your firm is considering for implementation has these estimated costs and revenues: an investment cost of $50,000; maintenance costs that start at $5,000 at the end of year (EOY) 1 and increase by $1,000 for each of the next 4 years, and then remain constant for the following 5 years; savings of $20,000 per year (EOY 1–10); and finally a resale value of $35,000 at the EOY 10. If the project has a 10-year life and the firm’s MARR is 10% per year, what is the present worth of the project? Is it a sound investment opportunity?Hajia Timber Ltd (GTL) produces and exports lumber and planks. It owns a plant whichhas value of GHC 1,800,000 as at 1 January 2010. The government of Ghana,passes alegislation that restricts the exportation of lumber. Consequently GTL has to reduceproduction by 40%. Cash flow forecast for the next five years included in the budgetsubmitted for management approval in January 2010 shows the following:Year Cash flows (GHC)2010 552,0002011 506,0002012 376,0002013 250,0002014 560,000The cashflow forecast for 2014 includes expected proceeds from disposal of the plant. Thecash flow projections also ignore the effects general upwards movement in prices.It is estimated that if the plant is sold in January 2010, it would realize the net proceeds ofGHC 1,320,000. The costs of capital for GBL is 15% (ignoring inflationary effect)RequiredCalculate the recoverable amount of the plant and impairment loss (if any).A business invests $5000 and initially plans to achieve annual revenue of $1100/yr with $200/yr expenses (starting at the end of ar 1) for ten years. No market value if used for ten years. 1.If at the end of the sixth year, instead, the investment is sold for $1000, calculate the PW, FW and AW for a BTCF MARR of 12%. Is the investment a good one if used this way? Why?
- A company bought an electrical equipment worth Php 235,000 with useful life of 10 years. What are the book values of the asset at the end of year if the equipment has a salvage value of Php 15,000 using: a. Straight Line Methodb. Sinking Fund Method at 12% interest ratec. Declining Balance Methodd. Double Declining Balance Methode. Sum-of-the-Year’s-Digit MethodLim Bon Fing Y Hermanos Inc has offered for sale its two-storey building in thecommercial district of Cebu City. The building contains two stores on the ground floor anda number of offices on the second floor.A prospective buyer estimates that if he buys this property, he will hold it for about 10years. He estimates that the average receipts from the rental during this period to beP350,000.00 and the average expenses for all purpose in connection with its ownershipand operation (maintenance and repairs, janitorial services, insurance, etc.) to beP135,000.00. He believes that the property can be sold for a net of P2,000,000 at the endof the 10th year. If the rate of return on this type of investment is 7%, determine thecash price of this property for the buyer to recover his investment with a 7% return beforeincome taxes.ANSWER: P2,526,768.61PLEASE ANSWER AND SHOW SOLUTION Machine cost = $15,000; Life = 8 years; salvage value = $3000. What minimum cash return would the investor demand annually from the operation of this machine if he desires interest annually at the rate of 8% in his investment and accumulates a capital replacement fund by investing annual deposits at 5%?