A company expects the cost of equipment maintenance to be $5,000 in year one, $5,500 in year two, and amounts increasing by $500 per year through year 10. At an interest rate of 10% per year, the present worth of the maintenance cost is nearest to A) $38,220 B) $46,660 c) $51,790 D $42,170

A company expects the cost of equipment maintenance to be $5,000 in year one, $5,500 in year two, and amounts increasing by $500 per year through year 10. At an interest rate of 10% per year, the present worth of the maintenance cost is nearest to A) $38,220 B) $46,660 c) $51,790 D $42,170

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 17EB: Caduceus Company is considering the purchase of a new piece of factory equipment that will cost...

See similar textbooks

Related questions

Q: A company is considering purchasing a new piece of machinery at a cost $50,000. It is expected to…

A: Economic Value Added Economic value added is referred to as the economic profit which is calculated…

Q: A company is considering the purchase of a new machine for $59,000. Management predicts that the…

A: Financial Management: Financial management comprises of two words i.e. Finance and management.…

Q: The first-year maintenance cost for a new car is estimated to be $100, and it increases at a uniform…

A: Today’s worth of dollars at a later date is the Present Value of the dollar. For example, the value…

Q: Determine Annual worth values

A: Annual worth (AW) method is for evaluating the alternatives or investment proposals. It is the…

Q: The DPWH expects the cost of maintenance for a particular piece of heavy equipment to be P 50,000 in…

A: Present worth (PW) is a sum of PV of all the cashflows. Discounting is a technique which is used to…

Q: A piece of equipment costs ₱365,000 including shipping, installation and taxes. The supplier assures…

A: Depreciation expense: Depreciation expense is the reduction in a particular asset due to its use or…

Q: Elearning Company would like to develop its technology process by purchasing a production equipment…

A: Net present value is the difference between the present value of cash inflows and present value of…

Q: A company plans to spend $ 156244 to install a new machine. Annual maintenance cost is $ 13178.…

A: Here, Initial Investment is $156,244 Annual Maintenance Cost is $13,178 Annual Income in first year…

Q: The maintenance cost of a new equipment is projected to start at the end of the 2nd year at an…

Q: The maintenance cost of a certain equipment is P80,000.00 per year for the first 5 years,…

A: Annual cost for 5 years = P 80,000 Annual cost for next 5 years = P 120,000 Cost in 5th and 8th year…

Q: The year-end operating costs of a certain machine are estimated to be 120,000 the first year and to…

A: The question is related to equivalents uniform annual costs. Since the cost of maintainance is…

Q: A company expects the material cost of a certain manufacturing operation to be $20,000 per year. At…

A: This is the concept of time value of money. Present Worth is the present value of the future…

Q: The annual operating and maintenance (O&M) expenses of a company are $195,000 at EOY 1 decreasing by…

A: Interpretation: Annual Operating and Maintenance Expenses at end of year 1 = $195,000 Annual…

Q: The maintenance cost of a certain equipment is P80,000.00 per year for the first 5 years,…

A: The present value is the value of the sum received at time 0. It is the current value of the sum…

Q: A contractor estimates purchase of a new bulldozer will increase earnings $20,000 per year for each…

A: Increase in earning per year = $ 20,000 Period = 10 Years Increase in expenses = $ 2000 Annual…

Q: A company is considering the purchase of a new machine for P480,000. Management predicts that the…

A: Payback period: The payback period refers to the total years needed to cover the initial cash…

Q: A factory asset has a first cost of $100,000, annual costs of $15,000 the first year and increasing…

A: Given, Initial cost =$100,000 Annual Costs = $15,000 increasing by 7.5%

Q: what is the equivalent uniform annual expense over 30 years if the annual interest is 6%?

A: Equivalent Annual Cost = NPV × r 1 − (1 + r)-n

Q: A parcel of land can be leased for a period of 10 years. Initial development costs for clearing,…

A: Initial cost (C) = P 250000 First year revenue (R) = P 22000 Growth rate (g) = 5% n = 10 years r =…

Q: At an interest rate of 0.06 per year, the present worth of the maintenance cost is nearest to

A: Given PV=5000 Increasing =500 n=15 r=0.06 or 6%

Q: A company plans to spend $ 165126 to install a new machine. Annual maintenance cost is $ 10831.…

A: Information Provided: Initial cost = $165,126 Annual maintenance cost = $10,831 Annual Income =…

Q: The Highway Department expects the cost of maintenance for a piece of heavy construction equipment…

A: The value of money varies with time, therefore the time value of money considers the worth of the…

Q: The annual operating and maintenance (O&M) expenses of a company are $195,000 at EOY 1 decreasing by…

A: Future equivalent is calculated as: =Annual Cost*(1+Rate of Interest)Year

Q: A company is allocating $10 million to develop a new product. This money will be spent continuously…

A: Interest is an additional amount which is received on deposited amount. It increases the value of…

Q: The cost to manufacture a component used in intelligent interface was $22,000 the first year. The…

A: The present value of the cash flow is the current worth of a cash flow at a certain rate of interest…

Q: A shop installs a new equipment that prices 12M Peso. The shop assumes a rise of annual gross…

A: Payback period is a capital budgeting method. It is used to determine how much it will take for the…

Q: A company purchased a small equipment for $70000. Annual maintenance costs are expected to be $1850,…

A: Net present value (NPV) is the value of all the cash flow of the investment (positive and negative)…

Q: A company is considering the purchase of a new machine for $54,000. Management predicts that the…

A: Financial Management: Financial management comprises of two words i.e. Finance and management.…

Q: n equipment has a maintenance cost of P20,000 a year for two years, increased by P40,000 at the end…

A: In this we have to find out the present value and find out the semi annual payment for that.

Q: The annual operating and maintenance (O&M) expenses of a company are $195,000 at EOY 1 decreasing by…

A: Operating and maintenance expense = $195,000 Gradient = $8500 Time period = n = 10 years Interest…

Q: Border Steel invested $800,000 in a new shearing unit. At an interest rate of 12% per year…

Q: An annual maintenance cost of a generator is P1000 after two years and it is estimated to increase…

A: The question is based on the concept of Financial Accounting. As the cost is increasing by 10% per…

Q: A company expects the cost of equipment maintenance to be $5,000 in year one, $5,500 in year two,…

A: Answer - Given, Maintenance Cost = $5000 Gradient G = $500 I = 5%

Q: an Steel's expenses for heating and cooling a large manufacturing facility are expected to increase…

A: Arithmetic annuity can be converted into equivalent annuity by using formula.

Q: A contractor desires to replace a unit of equipment in 8 years and expects to need $300,000 (at that…

A: A= P(1+r/n)nt A= Future Value= 3,00,000 P= Initial amount r= Interest Rate n= No. of compounding=…

Q: A company expects the cost of equipment maintenance to be $5,000 in year one, $5,500 in year two,…

A: Maintenance cost in year 1 = $ 5000 Maintenance cost in year 2 = $ 5500 Annual increase in cost = $…

Q: A company is considering the purchase of a new machine for $58,000. Management predicts that the…

A: Financial Management: Financial management comprises of two words i.e. Finance and management.…

Q: E. The year-end operating and maintenance costs of a certain machine are estimated to be P4,800 the…

A: Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: The maintenance cost of a new equipment is projected to start at the end of the 2nd year at an…

A: Annual Equivalent cost is the annual amount of expenditure incurred each year resulting in total…

Q: A company is considering purchasing a new piece of machinery at a cost $60,000. It is expected to…

A: Economic Value Added = Net Operating Profit After Tax - ( Cost of Capital * Invested Capital)

Q: An asset costing $120,000 is to be depreciated over ten years to a nil residual value. Profits after…

A: The payback period is the time period in which a project will generate enough cash flow to recover…

Q: The maintenance cost of a new equipment is projected to start at the end of the 2nd year at an…

A: Deposit required would be amount required today would be present value of all future maintenance…

Q: Maintenance expenses for a bridge on the Ohio River are estimated to be $20,000 per year for the…

A: Equivalent annual cost (EAC) is the uniform cost of the project divided among total life of project…

Q: DataPoint Engineering is considering the purchase of a new piece of equipment for $200,000. It has…

A: Note: I am supposed to provide the solution of first three subparts. Please repost the remaining…

Q: The company buys an asset that costs $11,200 and returns net cash flow of $160 per month for 3…

A: NPV is the present value of cash inflows less present value of cash outflows. IRR is the discount…

Q: ny expects the cost of equipment maintenance to be $5,000 in year one, $5,500 in year two, and…

A: The given problem can be solved using NPV function in excel.

Q: The cost to manufacture a component used in intelligent interface was $22,000 the first year. The…

A: Present value method of calculation is used to know the value of future money at present date. The…

Q: The management of XYZ Beverage Company is considering to purchase a new equipment to increase the…

A: Payback period: It can be defined as the time that is taken by an investment before it starts…

Q: Net revenues at an older manufacturing plant will be $2 million for this year. The net revenue will…

A: The present value of the cash flow is the current worth of a cash flow at a certain rate of interest…

Question

A company expects the cost of equipment maintenance to be $5,000 in year one, $5,500 in year two, and amounts increasing by
$500 per year through year 10. At an interest rate of 10% per year, the present worth of the maintenance cost is nearest to
A) $38,220
B
$46,660
c) $51,790
D) $42,170

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Caduceus Company is considering the purchase of a new piece of factory equipment that will cost $565,000 and will generate $135,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return In Excel, see Appendix C.
Consolidated Aluminum is considering the purchase of a new machine that will cost $308,000 and provide the following cash flows over the next five years: $88,000, 92,000, $91,000, $72,000, and $71,000. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return in Excel, see Appendix C.
Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated revenue producing lite of 4 years. Mason has a required rate of return that is 12% and a cost of capital of 11%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?
A company expects the cost of equipment maintenance to be $5,000 in year one, $5,500 in year two, and amounts increasing by $500 per year through year 15. At an interest rate of 0.08 per year, the present worth of the maintenance cost is nearest to
A company plans to invest $11,000 dollars are new equipment to reduce operating costs. It is estimated that the savings will be $9,000 per year for the 5 year life of the equipment. Determine the equivalent uniform annual worth (EUAW) of the equipment at 6% interest. Express your answer in $ to the nearest $10.
The Highway Department expects the cost of maintenance for a piece of heavy construction equipment to be $5000 in year 1, to be $5500 in year 2, and to increase annually by $500 through year 10. At an interest rate of 10% per year, determine the present worth (in $, roundoff to 2 decimal places) of the maintenance costs.
The DPWH expects the cost of maintenance for a particular piece of heavy equipment to be P 50,000 in year 1, P 55,000 in year 2 and amounts increasing by P 5,000 through year 10. At an interest rate of 12% per year, the present worth of the maintenance cost is nearest to: P 583,837 P 421,685 P 383,782 P 221,678
The maintenance cost of a certain equipment is P40,000 per year for the first 5 years, P60,000 per year for the next 5 years, cost of overhaul at the end of the 5th and 8th year is P140,000. Find the equivalent uniform annual cost of maintenance if money is worth 6% compounded annually.
A company expects the cost of equipment maintenance to be $5,000 in year one, $5,500 in year two, and amounts increasing by $500 per year through year 15. At an interest rate of 0.08 per year, the present worth of the maintenance cost is nearest to Note: The given interest is already in decimal form. Do not round in between solution. Final answer round to the nearest whole number
A company has just spent $189,000 in purchase of new equipment for its production business. This equipment is expected to generate an additional $55,000 in annual profit in the first year. The annual profit is projected to increase by 6% each subsequent year up to 10 years, the service life of the equipment. Calculate the present worth of this investment if the profits can earn an interest rate of 10% per year. OA. $427,457 OB. $220,734 OC. $914,980 OD. $236,632
The Highway Department expects the cost of maintenance for a piece of heavy construction equipment to be $5000 in year 1, to be $5500 in year 2, and to increase annually by $500 through year 10. At an interest rate of 10% per year, determine the present worth of 10 years of maintenance costs.
The maintenance cost of a certain equipment is P80,000.00 per year for the first 5 years, P120,000.00 per year for the next 5 years, cost of overhaul at the end of the 5th year and the 8th year is P280,000.00. Find the equivalent uniform annual cost of maintenance if money is worth 6% compounded annually?