Question

**1.** If HAAS Machine Tool Company offers you an
SL-20 Machine for $60,000 at an annual interest rate of 4% for 7
years, what is the cost per minute for the machine (C_{M})?
(The company operates 5 days per week, 8 hours per day, 50 weeks
per year).

$0.0244

$0.0644

$0.0833

$0.0944

$0.1096

**2.** If you are negotiating a price (P) with HAAS
Machine Tool Company to purchase a VF machining center and you are
offered an annual interest rate of 8% for 7 years, what is the
purchase price (P) you must negotiate to keep your annual machine
payment for your company at $9,604?

$50,000

$55,000

$60,000

$65,000

$70,000

Answer #1

1.

PV = 60000

Nper = 7

Rate = 4%

FV = 0

Annual cost can be calculated by using the following excel
formula:

=PMT(rate,nper,pv,fv)

=PMT(4%,7,-60000,0)

= $9,996.5767

Total working minutes per year = 60 minute * 8 hours * 5 days * 50 week = 120,000 minutes

Cost per minute for the machine = Annual cost / Total working
minutes per year

= $9,996.5767 / 120,000

= $0.0833

**Cost per minute for the machine = $0.0833**

2.

PMT = 9604

Rate = 8%

Nper = 7

Purchase price can be calculated by using the following excel
formula:

=PV(rate,nper,pmt,fv)

=PV(8%,7,-9604,0)

= $50,000.

**Purchase price = $50,000**

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