The annual maintenance cost of a generator is P1000 after 1 year and it is estimated to increase by 4% each year for the subsequent 7 years. Find the present worth of the maintenance cost if the rate of interest is 15% compounded annually.

The annual maintenance cost of a generator is P1000 after 1 year and it is estimated to increase by 4% each year for the subsequent 7 years. Find the present worth of the maintenance cost if the rate of interest is 15% compounded annually.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 6MC: You want to invest $8,000 at an annual Interest rate of 8% that compounds annually for 12 years....

See similar textbooks

Related questions

Q: Suppose you paid 5900 pesos as a down payment on a MIO SPORTY motorcycle. The remaining balance is…

A: Answer: Calculation of the future value: Step 1: Calculation of the future value of 5900 pesos:…

Q: Compute the present value of $199500 that is invested for 6 years and 9 months at 2.45% compounded…

A: Here, Future Value is $199,500 Time Period is 6 years and 9 months Time Period in Months will be:…

Q: What present value amounts to $15,000 if it is invested for 20 years at 8% compounded annually?…

A: Present Value = Future value / (1+r)^n Where, r = rate of interest i.e. 8% n = no. of years i.e. 20…

Q: Annual maintenance for a machine are P 1,500.00 this year and are estimated to increase 10% each…

A: Working note for a, b and c as follows:

Q: How much money should be invested at rate 2% compounded semi-annually to produce a future value of…

A: Present value of an investment is the initial amount that is invested in financial asset. It is…

Q: A machine costs $5240 and produces benefits of $1000 at the end of each year for 8 years. Assume an…

A: The Payback period is among the of the techniques of capital budgeting that do not take into…

Q: A sum of GH¢100 is to be paid at the end of each year for 20 years. The effective compound interest…

A: Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only one…

Q: Find the future value if $2700 is invested for 7 years at an annual rate of 9% compounded quarterly.

A: If the money deposited in the account is left untouched it will end up growing into a larger balance…

Q: A person buys a piece of lot for P110,000 down payment and 10 deferred semi-annual payments of P…

A: Present value of all payments is calculated by using discount rate factor and then multiplying the…

Q: what is the equivalent annual cost of the maintenance?

A: Time value of money (TVM) refers to the method or technique which is used to measure the amount of…

Q: d) You expect to make 12 semi-annual payments of $ 5,000 each at the rate of return of 5%…

A: A theory that helps to compute the present or future value of the cash flows is term as the TVM…

Q: The annual maintenance cost of a generator is P834 after 1 year and it is estimated to increase by…

A: Annual Maintenance Cost = 834 End of period cost structure Increase in annual maintenance costs =…

Q: A sum of money invested now at 10 percent compounded semi-annually is to provide payments of $1500…

A: Let the money to be invested now = X Semiannual payment (A) = $1500 Number of payments (n) = 16 r =…

Q: How many years are required for P 1,000 to increase to P 2,000 if invested at 9% per year compounded…

A: Future value is obtained by compounding the present value using the appropriate rate of interest.

Q: The maintenance on a machine is expected to be ₱8984 for the second year and an additional ₱1,750…

A: Annual cost for 6 years = 1,750 Total Cost for the second year = 10,734 (8,984 + 1,750) Interest…

Q: If $17,500 is invested at an interest rate of 10% per year, find the value of the investment at the…

A: Present Value (PV)= $17,500 Interest Rate (r)= 10% per year Time period (n)= 5 years Future Value at…

Q: The maintenance cost in year 1 is $23000, increasing by 7% each year. What is the present worth of…

A: A study that proves that the future worth of the money is lower than its current value due to…

Q: If the initial investment is $200,000, what would be the nominal annual rate of interest compounded…

A: Interest is the cost of borrowing the money.

Q: The maintenance expense on a machine is expected to be $5,000 during thefirst year and to increase…

A: The present value is the value of the sum received at time 0 or the current period. It is the value…

Q: The total maintenance expense of a certain machine is 15,845 and can be disbursed by paying 3,458 at…

A: Annual equivalent cost is that is equivalent to the cost today considering the interest rate and…

Q: A 10-year investment will pay $2,500 at the end of this year, and the payments will grow at a rate…

A: Answer: Given data, Future value = $2,500 Required rate of return = 15% Paymets grow @ 5% per year

Q: How much must be deposited

A: An Annuity is a series of payments of fixed amounts and at fixed intervals. These can be of two…

Q: If 14700 dollars is invested at an interest rate of 9 percent per year, compounded semiannually,…

A: Using excel FV function

Q: A person invests $450 to be collected in 8 yr. Given that the interest rate on the investment is…

A: The future value of the cash flow is the current worth of a cash flow at a certain rate of interest…

Q: If 2400 dollars is invested in an account for 10 years. Find the value of the investment at the end…

A: Future value(FV) is the value of initial investments at a future date after compounding it with a…

Q: At an interest rate of 10% per year, determine the perpetual equivalent annual cost of: $70,000 now,…

A: The cash flows that are started immediately after the investment and go on for an infinite time…

Q: Calculate the perpetual equivalent annual cost (years 1 to ∞) of $1,000,000 now and $1,000,000 three…

A: Perpetual equivalent annual worth is the value of perpetuity payment in present time to the present…

Q: Considering an interest rate of 8%, that the cost of the equipment is $300,000 and you will replace…

A: Where the actual cost of equipment is dividing over the life of equipment is called annual cost.…

Q: If $ 30000 is invested at 8% interest per year, compounded continuously, how much will be in the…

Q: How many years will it take $145,000 to grow to $645,000 if it is invested in an account with a…

A: We use NPER function in excel to calculate time taken

Q: If money can be invested at 7% compounded monthly, find the present value of 55,300 whic is due…

A: Present value is the sum of the current value of money of future cash flows. It is also known as a…

Q: Suppose that annual income from a rental property is expected to start at P65,000 per year and…

A: Present equivalent refers to the current value of the amount that will be on some future date. It…

Q: The present amount needed to generate an annual income of $50,000 for 20 years if the expected rate…

A: Hello. Since your question has multiple parts, we will solve the first question for you. If you want…

Q: If $650 000 is saved for retirement, what rate of interest, compounded monthly, will provide…

A: Time value of money (TVM) refers to the method or technique which is used to measure the amount of…

Q: If 10700 dollars is invested at an interest rate of 5 percent per year, find the value of the…

A: Compounding is a technique through which future amount of present value is calculated by using…

Q: The cost of utilities (e.g. water and electricity) of a company is expected to increase at a rate of…

A: Introduction Equivalent annual cost The equivalent annual cost is the overall amount of…

Q: An asset is expected to pay a cash flow of $10 every 6 months in perpetuity with the first cash flow…

A: Future value (FV) is the worth of a present asset at a future date based on an estimated rate of…

Q: What is the future value of a series of $4,500 annual payments received at the end of each of the…

A: Annuity refers to series of equalized payments that are either made start or end of specific…

Q: You have invested 7 million dollars for a horizon of 24 months. You will be paid interest at 7.80%…

A: Initial investment (I) = 7 million Semiannual interest rate (r) = 0.039 (i.e. 0.078 / 2) Semiannual…

Q: A year-end bonus of $23,000 will generate how much money at the beginning of each month for the next…

A: Present Value: The present value is the value of cash flow stream or the fixed lump sum amount at…

Q: If $80,000 is invested in an annuity that earns 5.3%, compounded quarterly, what payments will it…

A: The total number of years is 8.5. The total number of quarters will be (8.5 × 4) = 34. Interest rate…

Q: What is the future value if the amount invested is 10,000 at 10% compounded quarterly for 5 years?…

A: Solution Given Present value 10000 Rate of interest 10% Compounding Quarterly…

Q: How much must be invested today at 10%, compounded semi-annually for 25 years, to produce P15,000?

A: Present Value refers to the value of cash flows today which is to be received at some future time…

Question

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1 Introduction

VIEW

Step 2 Given,

VIEW

Step 3 Calculation of Present Worth is as follow:

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Project A costs $5,000 and will generate annual after-tax net cash inflows of $1,800 for five years. What is the NPV using 8% as the discount rate?
Gardner Denver Company is considering the purchase of a new piece of factory equipment that will cost $420,000 and will generate $95,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further Instructions on internal rate of return in Excel, see Appendix C.
Project X costs $10,000 and will generate annual net cash inflows of $4,800 for five years. What is the NPV using 8% as the discount rate?
Jullo Company is considering the purchase of a new bubble packaging machine. If the machine will provide $20,000 annual savings for 10 years and can be sold for $50,000 at the end of the period, what is the present value of the machine investment at a 9% interest rate with savings realized at year end?
You want to invest $8,000 at an annual Interest rate of 8% that compounds annually for 12 years. Which table will help you determine the value of your account at the end of 12 years? A. future value of one dollar ($1) B. present value of one dollar ($1) C. future value of an ordinary annuity D. present value of an ordinary annuity
An annual maintenance cost of a generator is P1000 after two years and it is estimated to increase by 10% each year for the subsequent 7 years. Calculate the total maintenance cost 2 years after the last payment.
Annual maintenance cost for a machine is P1500 this year and are estimated to increase 10% each year. What is the present worth of the maintenance cost for 6 years if interest is 8%?
The maintenance on a machine is expected to be ₱8984 for the second year and an additional ₱1,750 cost every year until year 6. What is the present equivalent value at the beginning of the first year if the interest is 3% per year?
The maintenance expense of a certain machine is P4,565 at the end of 4 years and increases by P732 every year thereafter for 5 years. If the interest rate is 12.024% compounded annually, what is the equivalent annual cost of the maintenance?
The maintenance expense on a machine is expected to be $5,000 during thefirst year and to increase $500 each year for the following ten years. Whatpresent sum of money should be set aside now to pay for the required maintenance expenses over the ten-year period? (Assume 8% compound interest per year.)
The annual cost of a certain service is $36,000 at EOY 1 which decreases by 5.5% per year for a period of 12 years. If the interest rate is 5.5% per year, what is the present equivalent of the annual cost at the beginning of year 1?
An asset costs $7 million today. It can generate a $2 million income every 6 years, starting from today. This asset will last 60 years, generating 11 cash flows in total. What is the implied annual rate of return?.