Assume that you are considering to buy a Toyota Corolla automobile. You need to select one of the Diesel and Gasoline option. The related information is given in the following table. The car will be used for 5 years and then it will be sold. What is the annual average distance that makes Diesel and Gasolline option equivalent (i=10%). Diesel Gasoline Price (TL) 94000 78000 Insurance (TL/year) 700 700 Fuel cost (Lt/TL) 4.44 5.16 Fuel consumption (Ltkm) Salvage value after 5 years (TL) 0.042 0.058 70000 58000

Assume that you are considering to buy a Toyota Corolla automobile. You need to select one of the Diesel and Gasoline option. The related information is given in the following table. The car will be used for 5 years and then it will be sold. What is the annual average distance that makes Diesel and Gasolline option equivalent (i=10%). Diesel Gasoline Price (TL) 94000 78000 Insurance (TL/year) 700 700 Fuel cost (Lt/TL) 4.44 5.16 Fuel consumption (Ltkm) Salvage value after 5 years (TL) 0.042 0.058 70000 58000

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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You are considering buying a 10-year-old machine for $280, or a new fuel-efficient machine for$600. The new machine will save you $5 per month on your fuel bill, and you will be able to sellit for $300 in 10 years. The used machine will have no resale value at that time. Assume theinterest rate is 3% per year. According to the information given, which machine will you buy?
Max is planning to buy an equipment. Model X cost $300 to purchases and result is a costing savings of $150 per year, and last for 5 years. Model Z cost $450, result in costs savings of $130 per year, and last for 10 years. The discount rate is 20%. Required: a. Calculate the appropriate NPV for both the models. b. Calculate the approximate IRR for both the models. c. Calculate the Payback period for both the models. d. Which model should Max buy. e. If the inflation rate is expected to be 10%, will your advice to Max change.
Your friend Harold is trying to decide whether to buy or lease his next vehicle. He has gathered information about each option but is not sure how to compare the alternatives. Purchasing a new vehicle will cost $26,500, and Harold expects to spend about $500 per year in maintenance costs. He would keep the vehicle for five years and estimates that the salvage value will be $10,500. Alternatively, Harold could lease the same vehicle for five years at a cost of $3,480 per year, including maintenance. Assume a discount rate of 10 percent. Required: Calculate the net present value of Harold’s options. (Future Value of $1,Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) Advise Harold about which option he should choose.
You are considering buying a 30-HP electric motor which has an efficiency rating of 89%. The motor costs $10,000 and will be used for 10 years. The expected salvage value at that time is $1,000. The cost to run the electric motor is $0.09 per kWh for 2,000 hours a year. ( 1 HP = 0.7457 kW.) What is the total equivalent cost (present worth) of owning and operating the motor for 10 years at an interest rate of 12% per year?(a) $35,242(b)$25,884(c) $32,426(d) $22,425
As part of your financial planning, you wish to purchase a new car exactly 5 years from today. The car you wish to purchase costs $14,000 today, and your research indicates that its price will increase by 2% to 4% per year over the next 5 years.a. Estimate the price of the car at the end of 5 years if inflation is (1) 2% per year and (2) 4% per year.b. How much more expensive will the car be if the rate of inflation is 4% rather than 2%?c. Estimate the price of the car if inflation is 2% for the next 2 years and 4% for 3 years after that.
Suppose you can buy a new Toyota corolla for $20000 and sell it for $12000 in third year. For simplication, assume you sell the car at the beginning of the third year but can keep driving it until the end of the third year. Alternatively you can lease the car for $300 per month for three years and return it at the end of the three years. For simplication, assume that lease payments are made yearly instead of monthly- i.e,, that they are $3600 per year and are made at the beginning of each of the three years. a. If the interest rate R is 4%, it is better to buy or lease? b. If the interest rate is 10%,it is better to buy or lease? c. At what interest rate would you be indifferent between buying and leasing the car in percent?
Your company is trying to decide whether it should purchase a copier from Xerox or lease it. The copier has an expected life of 6 years, after which it has only marginal value (you can ignore any residual value). If you purchase it, the price is $145,000, payable now, and you would have to pay an annual service charge of $8,000. If you lease it, you would have an annual payment of $36,000 each year (for 6 years), which includes service. The lease payment and the annual service charge occur at the beginning of each year. The interest rate is 3.8%. Which option is least costly?
Two 100 horsepower motors are being considered for use: If power costs $0.10 per kWh, and if the interest rate is 12%, how many hours of operation per year is required to justify the purchase of XYZ brand motor? (1 hp = 0.746 kW). Which motor would you select if the motor is expected to operate 2,000 hours per year? Explain why.
You are considering two cars that you plan on keeping for 5 years. One has an EPA combined city and highway rating of 33 mpg. The second has an EPA rating of 35 mpg. Suppose gasoline costs $3.48 per gallon and you drive 10,000 miles each year. a) How much (in dollars) will you save in 1 year by purchasing the 35 mpg car? (Enter a number. Round your answer to the nearest cent.) b) If you deposit that amount at the end of each year for the 5 years of ownership into an account that earns 4.3% compounded annually, how much (in dollars) will you save over 5 years? (Enter a number. Round your answer to the nearest cent.)
You are considering two cars that you plan on making for 5 years. One has an EPA combined city and highway rating of 33 mpg. The second has an EPA rating of 36 mpg. Suppose gasoline costs $3.47 per gallon and you drive $10,000 miles each year. (Round your answer to the nearest cent.) (a) How much (in dollars) will you save in 1 year by purchasing the 36 mpg car? (b) If you deposit that amount at the end of each year for 5 years of ownership into account that earns 4.8% compounded annually, how much (in dollars) will you save over 5 years?
Home Innovations is evaluating a new product design. The estimated receipts and disbursements associated with the new product are shown below. MARR is 10%/year. Solve, a. What is the discounted payback period for this investment? b. If the maximum attractive DPBP is 3 years, what is the decision rule for judging the worth of this investment? c. Should Home Innovations buy the gang punch based on DPBP?
Your company is environmentally conscious and is considering two heatingoptions for a new buildings. What you know about each option is below, and your companywill use an annual interest rate (MARR) of 7% for this decision.1. Gas heating option: the initial equipment and installment of the natural gas systemwould cost OMR 83,000 right now. The maintenance costs of the equipment areexpected to be OMR 730 per year, starting next year, for each of the next 20 years.The energy cost is expected to be OMR 1840 starting next year and is expected to raiseby 7% per year for each of the next 20 years due to the price of the natural gas.2. Geothermal heating option: because of green energy incentives provided by thegovernment, the geothermal equipment and installation are expected to cost onlyOMR 72,000 right now, which is cheaper than the gas lines. There would be no energycost with geothermal, but because this is relatively newer technology themaintenance is expected to be OMR 3680 per year,…

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