A local government awards a landscaping company a contract worth $1.5 million per year for five years for maintaining public par
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Answer:
<u>Desing A: </u>23,024,370
<u>Desing B: </u>22,520,274.6
It should purchase desing B as the capitalized cost is lower.
Explanation:
We consider annuity for the overhauls and then, perpetuity to consider this incinerators will last indefinitely.
maintenance cost: 800,000 / 0.05 = 16,000,000
<u>Overhaul: </u>
The company will need to fund 1,250,000 every 5 years. We need to determinate the annuity to obtain this future value:
PV 1,250,000
time 5
rate 0.05
C $ $ 226,218.498
<u>Then at perpetuity:</u>
$ 226,218.498 / 0.05 = 4,524,370
<u>Desing A capitalized cost:</u>
2,500,000 + 16,000,000 + 4,524,370 = 23,024,370
We do the same for Desing B:
investment: 5,750,000
maintenance: 600,000 / 0.05 = 12,000,000
overhaul:
C $ 238,513.725
238,513.73/0.05 = 4,770,274.6
Capitalized cost: 5,750,000 + 12,000,000 + 4,770,274.6 = 22,520,274.6
Answer:
My Monthly payment will be $181.25
Explanation:
A loan provide funds for acquisition of asset and for investment purposes and its allows the arrangement for flexible repayments throughout the loan period based on terms agreed between the lender and borrower.
Following Formula used to calculate the installment payment.
Loan = Payment x
9,400 = Payments x
9,400 = Payment x 51.863
Payments = 9,400 / 51.863
Payments = 181.25