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
tangare [24]
2 years ago
5

You and your partner have become very interested in cross-country motorcycle racing and wish to purchase entry-level equipment.

You have identified two alternative sets of equipment and gear. Package K has a first cost of $200,000, an operating cost of $6,000 per quarter, and a salvage value of $30,000 after its 2-year life. Package L has a first cost of $280,000 with a lower operating cost of $2,200 per quarter and an estimated $30,000 salvage value after its 4-year life. Which package offers the lower present worth analysis at an interest rate of 20% per year, compounded quarterly
Business
1 answer:
Lana71 [14]2 years ago
7 0

Answer:

Package K offers the lower present worth analysis.

Explanation:

This can be determined using the following 3 steps.

Step 1: Calculations of present worth of Package K

First cost = $200,000

Present value of quarterly operating cost = quarterly operating cost * ((1- (1/(1 + r))^n)/r) ....... (1)

Where;

r = quarterly interest rate = interest rate per year / Number of quarters in a year = 20% / 4 = 5%, or 0.05

n = number of quarters = Number of years * Number of quarters in a year = 2 * 4 = 8

Substituting the values into equation (1), we have:

Present value of quarterly operating cost = $6,000 * ((1- (1/(1 + 0.05))^8)/0.05) = $38,779.28

Present value of salvage value = Salvage value / (1 + quarterly interest rate)^Number of quarters = $30,000 / (1 + 0.05)^8 = $20,305.18

Present worth of package K = First cost + Present value of quarterly operating cost - Present value of salvage value = $200,000 + $38,779.28 - $20,305.18 = $218,474.10

Step 2: Calculations of present worth of Package L

First cost = $280,000

Present value of quarterly operating cost = quarterly operating cost * ((1- (1/(1 + r))^n)/r) ....... (1)

Where;

r = quarterly interest rate = interest rate per year / Number of quarters in a year = 20% / 4 = 5%, or 0.05

n = number of quarters = Number of years * Number of quarters in a year = 4 * 4 = 16

Substituting the values into equation (1), we have:

Present value of quarterly operating cost = $2,200 * ((1- (1/(1 + 0.05))^16)/0.05) = $23,843.09

Present value of salvage value = Salvage value / (1 + quarterly interest rate)^Number of quarters = $30,000 / (1 + 0.05)^16 = $13,743.35

Present worth of package L = First cost + Present value of quarterly operating cost - Present value of salvage value = $280,000 + $23,843.09 - $13,743.35 = $218,474.10 = $269,900.25

Step 3: Comparison of present worth

Present worth of package K = $218,474.10

Present worth of package L = $269,900.25

Therefore, Package K offers the lower present worth analysis.

You might be interested in
The two factors that determine the costs of manufacturing inputs (materials, labor, and overhead) are price and quantity.
Brrunno [24]

Answer:

The correct answer is letter "A": True.

Explanation:

The costs of manufacturing are the total expenses companies incur during the production process. They mainly include <em>direct materials, labor, </em>and <em>overhead</em>. Besides, the prices of the three (3) factors mentioned above and their size (quantity) are considered factors that determine the manufacturing costs.

5 0
3 years ago
g Our company purchases $4,000 worth of merchandise inventory on credit with the terms 2/10, n/30. Transportation costs were an
irinina [24]

Answer: $3,826

Explanation:

Discount received on terms 2/10 = (Purchase value  – Cost of merchandise returned) x Discount Rate

= $4,000 - $300 x 2%

= $3,700 x 2%

= $74

 if the company paid the invoice within the discount period, Then the total cost of this merchandise

Total cost of merchandise =  Value of merchandise purchased– Cost of merchandise returned + Transportation Costs - Amount of discount received

= $4,000 - $300 + $200 - $74

= $3,826

5 0
3 years ago
One way of controlling "nuisance" variables is to match the various groups by picking the confounding characteristics and delibe
jonny [76]
Dang I used to know this but I completely forgot I will try to answer if it comes back to me
5 0
3 years ago
Read the section "The Effect of Price on Number of Suppliers." What support does the reading give for the idea that the music in
uranmaximum [27]

The effect of the demand and supply chain can be seen in the highly volatile nature of the music industry.

Explanation:

The principles are highly accurate for many industries that are given in the article  "The Effect of Price on Number of Suppliers."

This is effectively about the demand and supply chain and one can see how this applies to the people in the music industry who have to deal with these overhauls.

The industry is largely volatile and there are trends that come and go in a couple of years and with them go away whole labels and and artist.

The people who survive are the ones that adapt and do not go all in on one trend or another.

This one can even see in other business practices.

5 0
3 years ago
Alex, Kara, and Susie are the only three people in a community. Alex is willing to pay $20 for the fifth unit of a public good,
densk [106]

Answer:

a) $25 is the correct answer.

Explanation:

Those are the only three people in the community. Susie is willing to pay $25 and everyone else is willing to pay less than that.

7 0
3 years ago
Other questions:
  • Polly tried for a half an hour to get online. Her tablet could detect a signal, which means that her wireless card was turned on
    5·2 answers
  • Lars thinks he might like to be self-employed. He is thinking about owning and operating a restaurant as a possible career. What
    5·1 answer
  • Globalization is allowing countries to _________ many of their employers, particularly those in labor intensive, low paying indu
    5·2 answers
  • Suppose that, for every 1-percentage-point decline of the discount rate, commercial banks collectively borrow an additional $2 b
    10·1 answer
  • Six years ago, James Corporation sold a $100 million bond issue to expand its facilities. Each debenture has a $1,000 par value,
    9·1 answer
  • Portfolio income included all of the following EXCEPT:
    7·1 answer
  • Kara voluntarily quit her job as an insurance agent to return to school full time to earn an MBA degree. With degree in hand, sh
    7·1 answer
  • Suppose stocks offer an expected rate of returns of 10% with a standard deviation of 20%, and gold offers an expected return of
    5·1 answer
  • What are a few ways in which the agile methodology differs from the traditional methodology?
    14·1 answer
  • a cartel is a group of oligopolists who try to behave like a single monopolist and split the benefits among themselves
    5·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!