1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
sergey [27]
3 years ago
6

A company is considering buying a new piece of machinery. A 10% interest rate will be used in the computations. Two models of th

e machine are available.
Machine I

Initial cost:$80,000

End -of -useful –life Salvage value, S: 20,000

Annual operating cost 18,000

Useful life, in years 20

Machine II

Initial cost: $100,000

End -of -useful –life Salvage value, S: 25,000

Annual operating cost: 15,000 first 10 years, 20,000 thereafter

Useful life, in years: 25

(a) Determine which machine should be purchased, based on equivalent uniform annual cost.

(b) What is the capitalized cost of Machine I?

(c) Machine I is purchased and a fund is set up to replace Machine i at the end of 20 years. Compute the required uniform annual deposit.

(d) Machine I will produce an annual saving of material of $28,000. What is the rate of return if Machine I is installed?

(e) What will be the book value of Machine I after 2 years, based on sum -of -years' -digits depreciation?

(f) What will be the book value of Machine II after 3 years, based on double declining balance depreciation?
Business
1 answer:
JulsSmile [24]3 years ago
4 0

Answer:

Machine I

capitalized cost:  230,271.28

EAC: $ 27,047.58

Machine II

EAC:  $ 27,377.930  

As Machine I cost per year is lower it is better to purchase that one.

Annual deposits to purchase Machine I in 20 years: $ 1,396.770  

return of machine I with savings of 28,000 per year: 10.51%

Explanation:

WE calculate the present worth of each machine and then calculate the equivalent annual cost:

MACHINE 1

Operating cost:

C \times \frac{1-(1+r)^{-time} }{rate} = PV\\  

C 18,000

time 20

rate 0.1

18000 \times \frac{1-(1+0.1)^{-20} }{0.1} = PV\\  

PV $153,244.1470  

Salvage value:

\frac{Maturity}{(1 + rate)^{time} } = PV  

Maturity  $20,000.0000  

time   20.00  

rate  0.1

\frac{20000}{(1 + 0.1)^{20} } = PV  

PV   2,972.87  

Total: -80,000 cost - 153,244.15 annual cost + 2,972.87 salvage value:

Total: 230,271.28

PV \div \frac{1-(1+r)^{-time} }{rate} = C\\  

Present worth  $(230,271.28)

time 20

rate 0.1

-230271.28 \div \frac{1-(1+0.1)^{-20} }{0.1} = C\\  

C -$ 27,047.578  

Fund to purchase in 20 years:

FV \div \frac{(1+r)^{time} -1}{rate} = C\\  

FV  $80,000.00  

time 20

rate 0.1

80000 \div \frac{(1+0.1)^{20} -1}{0.1} = C\\  

C  $ 1,396.770  

IF produce a 28,000 savings:

we must solve using a financial calcualtor for the rate at which the capitalized cost equals 28,000

PV \div \frac{1-(1+r)^{-time} }{rate} = C\\  

PV  $230,271.28  

time 20

rate 0.105126197

230271.28 \div \frac{1-(1+0.105126197287798)^{-20} }{0.105126197287798} = C\\  

C  $ 28,000.000  

rate of 0.105126197 = 10.51%

<u>Machine II</u>

100,000 cost

25,000 useful life

15,000 operating cost during 10 years

20,000 for the next 15 years

Present value of the operating cost:

C \times \frac{1-(1+r)^{-time} }{rate} = PV\\  

C 15,000

time 10

rate 0.1

15000 \times \frac{1-(1+0.1)^{-10} }{0.1} = PV\\  

PV $92,168.5066  

C \times \frac{1-(1+r)^{-time} }{rate} = PV\\  

C 20,000

time 15

rate 0.1

20000 \times \frac{1-(1+0.1)^{-15} }{0.1} = PV\\  

PV $152,121.5901  

in the timeline this is at the end of the 10th year we must discount as lump sum for the other ten years:

\frac{Maturity}{(1 + rate)^{time} } = PV  

Maturity  $152,121.5901  

time   10.00  

rate  0.1

\frac{152121.590126167}{(1 + 0.1)^{10} } = PV  

PV   58,649.46  

salvage value

\frac{Maturity}{(1 + rate)^{time} } = PV  

Maturity  $25,000.0000  

time   25.00  

rate  0.1

\frac{25000}{(1 + 0.1)^{25} } = PV  

PV   2,307.40  

Total cost: 100,000 + 92,168.51 + 58,649.46 - 2,307.40 = $248,510.57

PV \div \frac{1-(1+r)^{-time} }{rate} = C\\  

PV  $248,510.57  

time 25

rate 0.1

248510.57 \div \frac{1-(1+0.1)^{-25} }{0.1} = C\\  

C  $ 27,377.930  

You might be interested in
Joseph is an unemployed yard landscaping worker who is trying to find employment as he last had work seven months ago. He is now
Mandarinka [93]

Answer:

Cyclical Unemployment

Explanation:

Cyclical Unemployment occurs due to irregularities surrounding an economy and these said cycles eventually brings about recession and thus, a good number of willing workers would not be able to get jobs due to this fact. What Joseph is experiencing is called Cyclical unemployment.

3 0
3 years ago
Consider an economy that only produces two goods: DVDs and DVD players. Last year, 10 DVDs were sold at $20 each and 5 DVD playe
dangina [55]

Answer:

$4,000

Explanation:

Given that,

Last year:

DVDs sold = 10

Selling price of each DVD = $20

DVD players sold = 5

Selling price of each DVD player = $100

This year:

DVDs sold = 150

Selling price of each DVD = $10

DVD players sold = 10

Selling price of each DVD player = $60

Real GDP:

= (No. of DVDs sold this year × Selling price of each DVD last year) + (No. of DVD players sold this year × Selling price of each DVD player last year)

= (150 × $20) + (10 × $100 )

= 3,000 + 1,000

= $4,000.

3 0
3 years ago
In which one of the following instances is rivalry among competing sellers notmore intense?
dimaraw [331]

Answer: E.When there are so many industry rivals that the impact of any one company's actions is spread thinly across all industry members

Explanation:

The more the number of players in an industry the more it gets congested and especially for the competing sellers. The decision for increasing or reducing price is met by follower firms to do the same thing. It gets less competitive because you know all the players in the industry would be following the same practices and doing the same thing.

7 0
3 years ago
The term that is used to refer to a situation in which one party to an economic transaction has less information than the other
Dmitry_Shevchenko [17]

Answer: The correct answer is choice c.

Explanation: Asymmetric information is the term that is used to refer to a situation in which on part to an economic transaction has less information than the other party. This term is also known as information failure.

3 0
3 years ago
A market research study of soft drink consumption and distribution in Hungary commissioned by an American company indicated that
Nutka1998 [239]

Answer:

comparability of data

Explanation:

Comparability of information is one attribute used only to characterize the consistency of descriptive statistics. For two factors the principle of comparability of data is especially critical to a Triad.

Secondly, the Constellation demonstrates shared data sets. Through nature, the shared data sets include information from different analytical techniques. The degree of comparability among two separate sequencing / technical methods affects the way in which sets of data can be jointly compiled, analyzed and used to help strategic thinking.

7 0
2 years ago
Other questions:
  • According to ian wolfman, "brands that thrive will be those, like pizza hut, that can efficiently build sustainable relationship
    8·1 answer
  • "The board of directors of Capstone Inc. declared a $0.70 per share cash dividend on its $3 par common stock. On the date of dec
    9·1 answer
  • Which research method offers the advantages of high response rates, great flexibility in dealing with respondents, and good cont
    11·1 answer
  • Cecil Jameson, Attorney-at-Law, is a proprietorship owned and operated by Cecil Jameson. On July 1, 2007, Cecil Jameson, Attorne
    10·1 answer
  • My job is to take pictures for _____ use by advertising agencies.
    15·2 answers
  • Assume that Clampett, Inc., has $200,000 of sales, $150,000 of cost of goods sold, $60,000 of interest income, and $40,000 of di
    15·1 answer
  • Which statement or statements apply to a bond which is selling at a premium?
    6·2 answers
  • The company allocated manufacturing overhead of using a predetermined overhead rate of per machine hour. The total actual manufa
    12·1 answer
  • Which of the following is a potential disadvantage when considering long-term loans as an option for raising capital?
    10·1 answer
  • I'll just give you the points lol
    11·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!