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A university student painter is considering the purchase of a new air compressor and paint gun to replace an old paint sprayer. (Both items belong to Class 9 and have a 25% CCA rate). These two new items cost $12,000 and have a useful life of four years, at which time they can be sold for $1,600. The old paint sprayer can be sold for $500 and could be scrapped for $250 in four years. The student believes that operating revenues will increase annually by $8,000. Should the purchase be made?
The tax rate is 22% and the required
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- Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6 years, and an estimated salvage value of 800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase- The replacement machine would permit an output expansion, so sales would rise by 1,000 per year; even so, the new machines much greater efficiency would cause operating expenses to decline by 1,500 per year The new machine would require that inventories be increased by 2,000, but accounts payable would simultaneously increase by 500. Dautens marginal federal-plus-state tax rate is 25%, and its WACC is 11%. Should it replace the old machine?D**M Pizza has a delivery car that is uses for pizza deliveries. The transmission needs to be replaced, and there are several other repairs that need to be done. The car is nearing the end of its life, so the options are to either overhaul the car or replace it with a new car. D&M’s has put together the following budgetary items: If D&M replaces the transmission of the pizza delivery vehicle, they expect to be able to use the vehicle for another 5 years. If they purchase a new vehicle, they will sell the existing one and use the new vehicle for 5 years and then trade it in for another new pizza delivery vehicle. If they trade for the new delivery vehicle, their operating expenses will decrease because the new vehicle is more gas efficient. This project is analyzed using a discount rate of 15%. What should D&M do?A university student painter is considering the purchase of a new air compressor and paint gun to replace an old paint sprayer. (Both items belong to Class 9 and have a 25 percent CCA rate.) These two new items cost $12,000 and have a useful life of four years, at which time they can be sold for $1,600. The old paint sprayer can be sold now for $500 and could be scrapped for $250 in four years. The entrepreneurial student believes that operating revenues will increase annually by $8,000. The tax rate is 22 percent and the required rate of return is 15 percent. What is the NPV of the new equipment? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) NPV $ Should the purchase be made? Yes No
- A university student painter is considering the purchase of a new air compressor and paint gun to replace an old paint sprayer. (Both items belong to Class 9 and have a 25% CCA rate.) These two new items cost $13,500 and have a useful life of four years, at which time they can be sold for $3,100. The old paint sprayer can be sold now for $650 and could be scrapped for $400 in four years. The entrepreneurial student believes that operating revenues will increase annually by $9,500. The tax rate is 22% and the required rate of return is 15%. What is the NPV of the new equipment? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) NPV $ Should the purchase be made? multiple choice Yes NoZoysia University must purchase mowers for its landscape department. The university can buy five EVF mowers that cost $8,500 each and have annual, year-end maintenance costs of $1,850 per mower. The EVF mowers will be replaced at the end of Year 5 and have no value at that time. Alternatively, Zoysia can buy seven AEH mowers to accomplish the same work. The AEH mowers will be replaced after seven years. They each cost $7,500 and have annual, year-end maintenance costs of $1,925 per mower. Each AEH mower will have a resale value of $700 at the end of seven years. The university’s opportunity cost of funds for this type of investment is 9 percent. Because the university is a nonprofit institution, it does not pay taxes. It is anticipated that whichever manufacturer is chosen now will be the supplier of future mowers. What is the EAC of each type of mower?Zoysia University must purchase mowers for its landscape department. The university can buy eight EVF mowers that cost $7,700 each and have annual, year-end maintenance costs of $1,635 per mower. The EVF mowers will be replaced at the end of Year 4 and have no value at that time. Alternatively, Zoysia can buy ten AEH mowers to accomplish the same work. The AEH mowers will be replaced after eight years. They each cost $6,700 and have annual, year-end maintenance costs of $1,925 per mower. Each AEH mower will have a resale value of $700 at the end of eight years. The university’s opportunity cost of funds for this type of investment is 8 percent. Because the university is a nonprofit institution, it does not pay taxes. It is anticipated that whichever manufacturer is chosen now will be the supplier of future mowers. What is the EAC of each type of mower? Note: Your answers should be a negative value and indicated by a minus sign. Do not round intermediate calculations and round your…
- Zoysia University must purchase mowers for its landscape department. The university can buy six EVF mowers that cost $7,600 each and have annual, year-end maintenance costs of $1,725 per mower. The EVF mowers will be replaced at the end of Year 4 and have no value at that time. Alternatively, Zoysia can buy eight AEH mowers to accomplish the same work. The AEH mowers will be replaced after seven years. They each cost $6,600 and have annual, year-end maintenance costs of $1,725 per mower. Each AEH mower will have a resale value of $800 at the end of seven years. The university’s opportunity cost of funds for this type of investment is 9 percent. Because the university is a nonprofit institution, it does not pay taxes. It is anticipated that whichever manufacturer is chosen now will be the supplier of future mowers. What is the EAC of each type of mower? (Your answers should be a negative value and indicated by a minus sign. Do not round intermediate calculations and round your answers…The manager at a Sherwin-Williams store has decided to purchase a new $30,000 paint mixing machine with high-tech instrumentation for matching color and other components. The machine may be paid for in one of two ways: (1) pay the full price now, less a 3% discount, or (2) pay $5,000 now,$8,000 one year from now, and $6,000 at the end of each of the next 4 years. If interest is 12% compounded annually, determine which way is best for themanager to make the purchase.Brooke is evaluating two alternatives for improving the exterior appearance of her Victorian-style house that she is remodeling inside. She plans to keep this as her home for 20 more years. The house can be completely painted at a cost of $16,000. The paint is expected to remain attractive for 5 years, at which time repainting will be necessary. Every time the building is repainted (i.e., in years 5, 10, and 15), the cost will increase by 20% over the previous time. As an alternative, the exterior can be covered with a vintage-appearing vinyl-coated siding now and again 10 years from now at a cost 25% greater than the present cost of the siding. At a MARR of 10% per year, what is the maximum amount that Brooke should spend now on the siding alternative so that the two alternatives will just break even? Solve using factors. The maximum amount that Brooke should spend now on the siding alternative is $ . Note:- Do not provide handwritten solution. Maintain accuracy and quality in…
- Brooke is evaluating two alternatives for improving the exterior appearance of her Victorian-style house that she is remodeling inside. She plans to keep this as her home for 20 more years. The house can be completely painted at a cost of $16,000. The paint is expected to remain attractive for 5 years, at which time repainting will be necessary. Every time the building is repainted (i.e., in years 5, 10, and 15), the cost will increase by 20% over the previous time. As an alternative, the exterior can be covered with a vintage-appearing vinyl-coated siding now and again 10 years from now at a cost 25% greater than the present cost of the siding. At a MARR of 10% per year, what is the maximum amount that Brooke should spend now on the siding alternative so that the two alternatives will just break even? Solve using factors. The maximum amount that Brooke should spend now on the siding alternative is $Anderson County has 35 older-model school buses that will be salvaged for $5,000 each. These buses cost $144,000 per year for fuel and maintenance. Now the county will purchase 35 new school buses for $40,000 each. They will travel an average of 2,000 miles per day for a total of 360,000 miles per year. These new buses will save $10,000 per year in fuel (compared with the older buses) for the entire group of 35 buses. If the new buses will be driven for 15 years and the county’s MARR is 6% per year, what is the equivalent uniform annual cost of the new buses if they have negligible market value after 15 years?The Department of Engineering is contemplating the purchase of a top-of-the- line PCB drilling machine to be used in its laboratories. The price of the machine is $5,000. The depreciation rate of the machine follows the SL method over its 10 years life. The market value of the machine at the end of its life is estimated to be $1,000. Annual fees paid by students to use the machine are estimated to be $500. What is the interest rate that would make this purchase break even if the Department would sell the machine at EOY 8? (Hint: the market value at EOY 8 is the book value of the machine at the time).
