On January 1 of this year, Shannon Company completed the following transactions (assume a 10% annual interest rate): a. Bought a delivery truck and agreed to pay $60,000 at the end of three years. b. Rented an office building and was given the option of paying $10,000 at the end of each of the next three years or paying $28,000 immediately. c. Established a savings account by depositing a single amount that will increase to $90,000 at the end of seven years. d. Decided to deposit a single sum in the bank that will provide 10 equal annual year-end payments of $40,000 to a retired employee (payments starting December 31 of this year). Required (show computations and round to the nearest dollar): Page 507 1. In (a), what is the cost of the truck that should be recorded at the time of purchase? 2. In (b), which option for the office building results in the lowest present value? 3. In (c), what single amount must be deposited in this account on January 1 of this year? 4. In (d), what single sum must be deposited in the bank on January 1 of this year?

On January 1 of this year, Shannon Company completed the following transactions (assume a 10% annual interest rate): a. Bought a delivery truck and agreed to pay $60,000 at the end of three years. b. Rented an office building and was given the option of paying $10,000 at the end of each of the next three years or paying $28,000 immediately. c. Established a savings account by depositing a single amount that will increase to $90,000 at the end of seven years. d. Decided to deposit a single sum in the bank that will provide 10 equal annual year-end payments of $40,000 to a retired employee (payments starting December 31 of this year). Required (show computations and round to the nearest dollar): Page 507 1. In (a), what is the cost of the truck that should be recorded at the time of purchase? 2. In (b), which option for the office building results in the lowest present value? 3. In (c), what single amount must be deposited in this account on January 1 of this year? 4. In (d), what single sum must be deposited in the bank on January 1 of this year?

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter10: Project Cash Flows And Risk

Section: Chapter Questions

Problem 13PROB

See similar textbooks

Similar questions

25 A machine costs R20 000. Depreciation will be written off at 20% per annum. Which one of the following amounts shows its carrying amount after 4 years if the reducing balance method is used? A. R9 030 B. R8 192 C. R8 256 D. R8 524
Q9. Pertinent information for two alternatives A and B is shown below. If i=10%/year and the effective income tax rate is 35%, answer the following true/false questions. Alt. A Alt.B Basis, $ 150,000 225,,000 Gross Income (GI), $ 100,000 100,000 Operating Expense (OE), $ 30,000 10,000 Salvage Value, $ 15,000 22,500 MARCS Depreciation Method ADS-6: Years Recovery Period GDS: 5-Years Recovery Period The TI (taxable income) of Alt. B at the end of year 1 is $45,000. Group of answer choices True False
Net Present Value Analysis [L014-2] Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 18%. After careful study, Oakmont estimated the following costs and revenues for the new product: \table[[Cost of equipment needed,$270,000
4a4) New equipment costs $645,000 and is expected to last for four years with no salvage value. During this time, the company will use a 30% CCA rate. The new equipment will save $155,000 annually before taxes. If the company's required rate of return is 12%, determine the PVCCATS of the purchase. Assume the half-year rule applies and a tax rate of 33%.
Construction cost for year 1 & 2 = $6 mil , $12 million totoal Operation and Maintenance (op. and main) Costs = 3rd yr (1st yr of operation) to 25th yr (last yr of operation). with nominal $800,000 in 3rd yr Annual electricity sales = year 3~25 , with nominal $850,000 in 3rd yr annual growth rate of the op. and main costs = 1%, annual growth rate of revenue = 3% social discount rate = 0.04 inflation = 0.02 terminal value = $23 mil. (nominal) 3) an additional $50,000 is added every 3 years for a special "cleaning" and therefore the project life has another 6 years with the terminal value unchanged. would this change be justified?
4. An asphalt road requires no upkeep until the end of 2 years when P60,000 will be neededfor repairs. After this P90,000 will be needed for repairs at the end of each years forthe next 5 years, then P120,000 at the end of each year for the next 5 years. If money isworth 14% compounded annually what was the equivalent uniform annual cost for the 12 yr.period? 5. A new office building was constructed 5 years ago by a consulting engineering firm. Atthe time the firm obtained the bank loan for ₱10,000,000 with a 20% annual interest rate,compounded quarterly. The terms of the loan called for equal quarterly payments for 10-year period with the right of prepayment at any time without penalty.Due to the internal changes in the firm, it is now proposed to refinance the loan throughan insurance company. The new loan is planned for a 20-year term with an interest rate of24% per annum, compounded quarterly. The insurance company has a one-time servicecharge of 5% of the balance. This new loan…
The net present value of the cost of operating a machine for the next five years is R8 947. The discount rate used by the company for investment appraisal is 9% Required What is the equivalent annual cost, and the present value of the cost in perpetuity of operating this machine? (Use discount factors to three decimal places) a. Equivalent annual cost: R92 825.56; cost in perpetuity: R9 283 b. Equivalent annual cost: R2 300; cost in perpetuity: R25 555.56 c. Equivalent annual cost: R2 000; cost in perpetuity: R20 000.00 d. Equivalent annual cost: R9 283; cost in perpetuity: R92 825.56
5. A concrete road requires no upkeep until the end of 3 years when P54, 000 will be needed for repairs. After this P93, 000 will be needed for repairs at the end of each year for the next 6 years, then P125, 000 at the end of each year for the next 5 years. If money is worth 15% compounded annually, what was the equivalent uniform annual cost for the 14-year period?
31 - ))770 000 $ investment was made 7 years ago for a construction equipment. Annual revenue from the use of this machine is $140 000. A maintenance-repair expense of $3,000 was made for the first year, and $500 for each subsequent year, in addition to the previous year. The company plans to sell the construction equipment at the end of the year (9th year) after 2 years with a scrap value of 135,000 USD. Calculate the cash flow from 1 year ago.A) 146 500B) 140 000C) 133 500D) 134 500E) 135 000
24. Using a MARR of 15%, determine the annual worth of packaging equipment having an initial cost of P830 000, a 10-year life, and a salvage value of P140 000.00. A net revenue of P250 000.00 per year is expected from this equipment. (Ans. P91 516.08)
Oo.73. Subject :- Finance An waste management company is intent to make an investment of $10,100, that can produce an annual revenue of $5,310 for seven years. An annual additional return is $3,000 at the end of each year for operating and maintaining the project. After the seven years, company has to cede working, and goverment will undertake the company. At the return rate of 0.7%, what is the Net Present Value ? NB: Use xx.xxxx (four decimals) format to anser the question. *the excel formula and tables if necesarry
A company expects the cost of equipment maintenance to be $5,000 in year one, $5,500 in year two, and amounts increasing by $500 per year through year 15. At an interest rate of 0.08 per year, the present worth of the maintenance cost is nearest to Note: The given interest is already in decimal form. Do not round in between solution. Final answer round to the nearest whole number