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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