Question

A piece of equipment costs $35,000 and has a life of 5 years. This equipment is expected togenerate revenues of $1000 per MONTH. It requires yearly maintenance at a cost of $3,400per year. The minimum rate of return (MARR) is 12% per year.

(a) If interperiod interest is earned, should they purchase the equipment?

(b) If interperiod interest is not earned, should they purchase the equipment? (Show all calculations)

Answer #1

a company is interested in a piece of equipment that costs
30,000 dollars. It will have a market value of 5000 at the end of
its six year life. if it is expected to increase the revenue by
7000 per year for the first 3 years, then by 2000 for the rest of
its life. if the company's MARR is 20% per year, what is the simple
payback period for this equipment?

A firm invests $35,000 in a piece of equipment which will bring
in savings of $10,000 per year for six years. At the required rate
of return of 12 percent, what is the present value of this
project?

Q1- The cost of maintaining a piece of
construction equipment increases at a constant rate of AED 80 per
month over its 16 year life. This year’s cost (end of year 1) is
expected to be AED 7500. Determine
the cost at the end of year 13
the Present Worth of the maintenance costs at an interest rate
of 9%.

Soong Corporation has leased a piece of equipment that has a
useful life of 12 years. This capital lease requires payments of
$43,000 per year for 12 years. Soong currently is able to borrow
money at a long-term interest rate of 8 percent. (Round to the
nearest dollar.) 1. Calculate the present value of the lease. 2.
Prepare the journal entry to record the lease agreement. 3. Prepare
the journal entry to record depreciation of the equipment for the
first...

We are thinking of investing in a piece of equipment that costs
$190,000. It should generate the following income and expenses each
year for five years, and have no salvage at the end of its five
years of estimated life. Revenue 250,000 Cost of Goods sold
-130,000 Gross Profit 120,000 Selling and admin (includes $15,000
of depreciation) -85,000 Net income per year 35,000
a. What is the cash flow per year, of the investment?
b. What is the Net Present...

It
is estimated that a certain piece of equipment can save $22,000 per
year in labor and materials costs. The equipment has an expected
life of five years no market value. If the company must earn a 7%
annual return on such investments, how much could be justified now
for the purchase of this piece of equipment?

Smash’n has an ageing piece of equipment which is less efficient
than more modern equivalents. This equipment will continue to
operate for another 15 years but operating and maintenance costs
will be NOK35,000 per year. Alternatively, it could be sold,
raising NOK20,000 now and replace with its modern equivalent which
costs NOK 70,000 but has reduced operating and maintenance costs at
NOK 30,000 per year. This machine could be sold at the end of its
15-year life for scrap for...

A piece of equipment was purchased 2 years ago by Toshiba
Imaging for $50,000 was expected to have a useful life of 5 years
with a $5,000 salvage value. Its performance was less than
expected, and it was upgraded for $20,000 one year ago. Increased
demand now requires that the equipment be upgraded again for
another $17,000 so that it can be used for 3 more years. If
upgraded, its annual operation cost will be $27,000 and it will
have...

A company buys a piece of equipment for $60,000. The equipment
has a useful life of three years. No residual value is expected at
the end of the useful life. Using the double-declining-balance
method, what is the company's depreciation expense in the first
year of the equipment’s useful life? (Do not round intermediate
calculations) $40,000. $20,000. $15,000. $30,000.

A company has purchased a piece of equipment today for $5,000.
It is expected that theequipment will save them $1000 beginning in
year 5 with the savings increasing by $200 eachyear thereafter. The
equipment will require $1000 worth of maintenance in year 6. Given
theequipment has a life of 10 years will the company recover their
investment? Assume an interestrate of 6%. Draw the cash flow
diagram.

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