Alternative R has a first cost of $76,000, annual M&O costs of $56,000, and a $20,000 salvage value after 5 years. Alternative S has afirst cost of $175,000 and a $52,000 salvage value after 5 years, but its annual M&O costs are not known. Determine the M&O costsfor alternative S that would yield a required incremental rate of return of 26%.The M&O cost for alternative S is $

Let the annual M&O cost be X, and find the incremental difference between two…

Answered: Alternative R has a first cost of…

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

Problem 1PS

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Alternative X has a first cost of 22000 an annual operating cost of 4100 , and a salvage value of 6825 after 27 year. Alternative Y has a first cost of 23000 an annual operating cost of 4200 , and a salvage value of 16560 after 27 year. If MARR of 27% per year, approximately what is the PW of each alternative?
Alternative X has a first cost of 36000 an annual operating cost of 6900, and a salvage value of 11025 after 13 year. Alternative Y has a first cost of 37000 an annual operating cost of 7000, and a salvage value of 16280 after 13 year. If MARR of 13% per year, approximately what is the PW of each alternative? Select one: O a. PW of X= -77518 and PW of Y= -78067 O b. PW of X= -75990 and PW of Y= -76529 O c. PW of X= -76750 and PW of Y= -77294 O d. PW of X= -78293 and PW of Y= -78848
A project with a life of 10 has an initial fixed asset investment of $25,620, an initial NWC investment of $2,440, and an annual OCF of −$39,040. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required return is 10 percent, what is the project's equivalent annual cost, or EAC? Show equations using excel.
A PROJECT IS ESTIMATED TO COST P 100,000.00, LASTS 8 YEARS, AND HAVE A P 10,000.00 SALVAGE VALUE. THEANNUAL GROSS INCOME IS EXPECTED TO AVERAGE P 24,000.00 AND ANNUAL EXPENSES, EXCLUDINGDEPRECIATION, WILL TOTAL P 6,000.00. IF CAPITAL IS EARNING 10% BEFORE INCOME TAXES, DETERMINE IFTHIS IS A DESIRABLE INVESTMENT USING:A.) RATE-OF-RETURN METHODB.) ANNUAL COST METHODC.) PRESENT-WORTH COST METHOD
Use Annual Cost Analysis to determine whether Alternative A or B should be chosen. The analysis period is 5 years. Assume an interest rate of 6% per year, compounded annually Alternative A Alternative B 1800 150 400 5 Initial Cost Annual Benefit Salvage Value Useful Life (yrs) 4230 340 2100 O Alternative B should be chosen, because its annual benefit is higher than Alternative A's Alternative A should be chosen, because its initial cost is lower than Alternative B's O Alternative B should be chosen, because its equivalent annual cost is $85.30 higher than Alternative A's Alternative A should be chosen, because its equivalent annual cost is $85.30 lower than Alternative B's
ABC Service can purchase a new assembler for $15,052 that will provide an annual net cash flow of $6,000 per year for five years. Calculate the NP of the assembler if the required rate of return is 12%. Show calculation. Would you accept/reject a project based on NPV decision criteria? Why? Based on NPV calculated in part A, determine Profitability Index (PI). Show calculation. Would you accept/reject a project based on PI decision criteria? Why?
A five-year project has an initial fixed asset investment of $345,000. an initial NWC investment of $25,000, and an annual OCF of -$41,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required return is 11percent, what is this project's equivalent annual cost, or EAC? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Equivalent annual cost
Two alternatives have been identified. Alternative A has a first cost of $10,000 and benefits of $3000 annually. Alternative B has a first cost of $12,000 and benefits of $3500 annually. The salvage values of each alternative are currently unknown. Using discounted payback period, which alternative is preferred at an interest rate of 10%?
A project is estimated to cost P120T, last 8 years & have a salvage value of P20T. The annual gross income is expected to average P50k & annual expenses is P5T. If capital is earning 10% determine if this is a desirable investment using annual cost method, what is the net cost.
Use the following information for problems 4, 5, 6, and 7 A project initially costs $40,000 and has a 10 year lifetime. The project returns benefits of S10,000 at the end of the first year, increasing by 12% in each of the following years. Costs are incurred at a rate of S4,000 per year. The anticipated salvage value is S7,000. MARR = 15%. 4. The benefit/cost ratio is closest to ... a) 1.24 b) 1.27 c) 1.30 O 1.33 e) 1.37 ) 1.41 g) 1.43 h) 1.45 5. The simple payback period is closest to ... D4.7 years b) 3.5 years c) 8.1 years d) 4.9 years e) 4.5 years f) 4.1 years g) 8.4 years h) 5.7 years i) a payback period does not occur
Colaw Company is considering buying equipment for $240,000 with a useful life of five years and an estimated salvage value of $12,000. If annual expected income is $21,000, the denominator in computing the annual rate of return is Group of answer choices $120,000. $252,000. $240,000. $126,000.
a. What should be your material cost for a project with MARR of 25% to make it into marginally acceptable and with an annual revenue of Php 10,000.00 for 8 years? Explain why, draw its cash flow diagram, and show your complete solutions. b. Now, if the said project has a salvage cost of Php 7,300.00 after 6 years, does it make a good investment opportunity? Explain why, draw its cash flow diagram, and show your complete solutions. c. Lastly, If the said project has an annual cost of Php 2,000.00, what is your capital investment? Explain why, draw its cash flow diagram, and show your complete solutions.

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