1.Beloit Co. is a manufacturer of mini-doughnut machine makers. Early in 2018 a customer asked Beloit to quote a price for a custom-designed doughnut machine to be delivered by the end of 2018. Once it is purchased, the customer intends to place the machine in service in January 2019 and will use it four years. The expected annual operating cash flow is estimated to be $140,000. The expected salvage value of the equipment at the end of five years is about 12% of the initial purchase price. To expect an 18% required rate of return on investment, what is the maximum amount that should be spent on purchasing the doughnut machine? Ans. P= $397,456.48

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Good day! I need your help tutor please answer the question attached below. The answer is already provided, which means that will be your basis if your answers are correct or not.

Ps. In your solution, you identify the given and the what is being asked in the problem and I want to see the formula that you used and box your final answer. Don't give me a solution that is made in ms excel, I am not econ major so i'm asking for you to do the manual or the traditional computation.Lastly, don't give me a shortcut solution because i want to learn and study your computation :)

Pps. I want you to use the Present Worth Method,Annuity Worth Method, Future Worth Method .(if applicable)

1.Beloit Co. is a manufacturer of mini-doughnut machine makers. Early in 2018 a customer asked Beloit to quote a price
for a custom-designed doughnut machine to be delivered by the end of 2018. Once it is purchased, the customer intends
to place the machine in service in January 2019 and will use it four years. The expected annual operating cash flow is
estimated to be $140,000. The expected salvage value of the equipment at the end of five years is about 12% of the
initial purchase price. To expect an 18% required rate of return on investment, what is the maximum amount that
should be spent on purchasing the doughnut machine? Ans. P= $397,456.48
Transcribed Image Text:1.Beloit Co. is a manufacturer of mini-doughnut machine makers. Early in 2018 a customer asked Beloit to quote a price for a custom-designed doughnut machine to be delivered by the end of 2018. Once it is purchased, the customer intends to place the machine in service in January 2019 and will use it four years. The expected annual operating cash flow is estimated to be $140,000. The expected salvage value of the equipment at the end of five years is about 12% of the initial purchase price. To expect an 18% required rate of return on investment, what is the maximum amount that should be spent on purchasing the doughnut machine? Ans. P= $397,456.48
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