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Inessa [10]
3 years ago
11

A firm can lease a truck for 4 years at a cost of $30,000 annually. It can instead buy a truck at a cost of $80,000, with annual

maintenance expenses of $10,000. The truck will be sold at the end of 4 years for $20,000. What is the better option if the discount rate is 10%?
Business
1 answer:
valina [46]3 years ago
8 0

Answer:

Leasing.

Explanation:

Find the present value of each and compare and choose the one with the lowest cost in present value terms.

<u>LEASE;</u>

Payments are in form of an annuity ;done using financial calculator (TI BA II plus)

PMT = -30,000

N ;duration = 4

I/Y = 10%

FV = 0

then CPT PV = -$95,095.96

<u>BUY</u>

Initial cost; (already in present value terms) = -$80,000

Annual maintenance(is an annuity); done using financial calculator (TI BA II plus)

PMT = -10,000

N ;duration = 4

I/Y = 10%

FV = 0

then CPT PV = -$31,698.65

Add PV of salvage value;

PV = FV/ (1+r)^4

PV = 20,000 /(1.10^4)

= 20,000/ 1.4641

= $13,660.26911

Overall PV of BUYING = (-80,000 -31,698.65 + 13,660.26911) = -$98,038.38

Therefore, leasing is a better option since the overall present value of costs  is lower at $95,095.96 compared to that of buying at 98,038.38.

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Environmental sustainability is ensuring that our natural resources can be used
Julli [10]

Answer:

The statement is: False.

Explanation:

Environmental sustainability refers to the set of efforts individuals and organizations make to use the natural resources an environment offers to satisfy people's needs while taking steps towards the conservation of those resources so they can be reused in the future. Environmental sustainability aims to avoid the indiscriminate exploitation of resources before some of them are extinct.  

<em>The most common example of environmental sustainability is reforestation or planting trees every time they are cut down to diminish deforestation effects.</em>

6 0
3 years ago
g Given the information below: ASSETS LIABILITIES Cash and cash equivalents $10,000 Current debts for the year $15,000 Other liq
artcher [175]

Answer:

The solvency ratio is closest to: B. 33%.

Explanation:

<em>The solvency ratio = After tax Net Operating Income ÷ Total Debt</em>

Thus,

The solvency ratio = $75,000 ÷ ($15,000 + $200,000)

                               = 35.88%

Therefore this is closest to B. 33%.

6 0
3 years ago
When the effective-interest method of bond discount amortization is used,
SSSSS [86.1K]

Answer: C. interest expense will not be a constant dollar amount over the life of the bond.

Explanation:

When a bond is sold at a discount, the discount will have to be amortized over the life of the bond to ensure that it reaches par at maturity.

As a result, the interest expense will be based on a larger figure every year which would mean that it would have to be larger each time. t will therefore not be a constant dollar amount over the life of the bond.

6 0
3 years ago
Areas that once had vast economic growth and large amounts of industry, but are now suffering from the effects of outsourcing ar
Irina-Kira [14]

Answer:

de-industrialization

Explanation:

Deindustrialization refers to the  phase of social and economic event caused by the elimination or decrease of industrial base or operation in a region or country, in particular of manufacturing industries or mining. It's the reverse of being industrialised.

It is the opposite of  industrialization. Deindustrialization usually happens as it is no longer profitable for a specific industrial activity. It's a phase in which industrial development is eliminated or decreased in a country or area due to a major social or economic transition.

7 0
3 years ago
A new operating system for an existing machine is expected to cost $565,000 and have a useful life of six years. The system yiel
Inessa [10]

Answer:

The net present value of each potential investment:

                         Machine A        Machine B

NPV                   $167,675             $2,267

Explanation:

a) Data and Calculations:

                                                         Machine A        Machine B

Cost of machine                              $565,000         $410,000

Incremental after-tax income            165,000             75,000

Salvage value                                      25,000             26,000

Estimated useful life                           6 years             8 years

Required rate of return                      10%                   10%

Annuity factor                                     4.355                5.335

PV factor                                             0.564                0.467

PV of incremental after-tax income $718,575         $400,125

                                                ($165,000*4.355)   ($75,000*5.335)

PV of salvage value                            $14,100             $12,142

Total PV of income                         $732,675          $412,267

NPV                                                  $167,675             $2,267

= Total PV of income minus PV of initial investment cost

7 0
2 years ago
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