Question

In: Finance

Hi all, Please list all steps!! Hayden Inc. has a number of copiers that were bought...

Hi all,

Please list all steps!!

Hayden Inc. has a number of copiers that were bought four years ago for $26,000. Currently maintenance costs $2,600 a year, but the maintenance agreement expires at the end of two years and thereafter the annual maintenance charge will rise to $8,600. The machines have a current resale value of $8,600, but at the end of year 2 their value will have fallen to $4,100. By the end of year 6 the machines will be valueless and would be scrapped.

Hayden is considering replacing the copiers with new machines that would do essentially the same job. These machines cost $31,000, and the company can take out an eight-year maintenance contract for $1,400 a year. The machines will have no value by the end of the eight years and will be scrapped.

Both machines are depreciated by using seven-year MACRS, and the tax rate is 40%. Assume for simplicity that the inflation rate is zero. The real cost of capital is 9%.

a. Calculate the equivalent annual cost, if the copiers are: (i) replaced now, (ii) replaced two years from now, or (iii) replaced six years from now. (Do not round intermediate calculations. Enter your answers as a positive value rounded to 2 decimal places.)

Equivalent Annual Cost
(i) Replaced now $
(ii) Replaced two years from now $
(iii) Replaced six years from now $

b. When should Hayden replace its copiers?

Replace in two years
Replace now
Replace after six years

Solutions

Expert Solution


Related Solutions

Hayden Inc. has a number of copiers that were bought four years ago for $32,000. Currently...
Hayden Inc. has a number of copiers that were bought four years ago for $32,000. Currently maintenance costs $3,200 a year, but the maintenance agreement expires at the end of two years, and thereafter, the annual maintenance charge will rise to $9,200. The machines have a current resale value of $9,200, but at the end of year 2, their value will have fallen to $4,700. By the end of year 6, the machines will be valueless and would be scrapped....
Hayden Inc. has a number of copiers that were bought four years ago for $21,000. Currently...
Hayden Inc. has a number of copiers that were bought four years ago for $21,000. Currently maintenance costs $2,100 a year, but the maintenance agreement expires at the end of two years and thereafter the annual maintenance charge will rise to $8,100. The machines have a current resale value of $8,100, but at the end of year 2 their value will have fallen to $3,600. By the end of year 6 the machines will be valueless and would be scrapped....
Hayden Inc. has a number of copiers that were bought four years ago for $21,000. Currently...
Hayden Inc. has a number of copiers that were bought four years ago for $21,000. Currently maintenance costs $2,100 a year, but the maintenance agreement expires at the end of two years and thereafter the annual maintenance charge will rise to $8,100. The machines have a current resale value of $8,100, but at the end of year 2 their value will have fallen to $3,600. By the end of year 6 the machines will be valueless and would be scrapped....
Hayden Inc. has a number of copiers that were bought four years ago for $37,000. Currently...
Hayden Inc. has a number of copiers that were bought four years ago for $37,000. Currently maintenance costs $3,700 a year, but the maintenance agreement expires at the end of two years, and thereafter, the annual maintenance charge will rise to $9,700. The machines have a current resale value of $9,700, but at the end of year 2, their value will have fallen to $5,200. By the end of year 6, the machines will be valueless and would be scrapped....
Hayden Inc. has a number of copiers that were bought four years ago for $22,000. Currently...
Hayden Inc. has a number of copiers that were bought four years ago for $22,000. Currently maintenance costs $2,200 a year, but the maintenance agreement expires at the end of two years, and thereafter, the annual maintenance charge will rise to $8,200. The machines have a current resale value of $8,200, but at the end of year 2, their value will have fallen to $3,700. By the end of year 6, the machines will be valueless and would be scrapped....
Hayden Inc. has a number of copiers that were bought four years ago for $20,000. Currently...
Hayden Inc. has a number of copiers that were bought four years ago for $20,000. Currently maintenance costs $2,000 a year, but the maintenance agreement expires at the end of two years and thereafter the annual maintenance charge will rise to $8,000. The machines have a current resale value of $8,000, but at the end of year 2 their value will have fallen to $3,500. By the end of year 6 the machines will be valueless and would be scrapped....
Hayden Inc. has a number of copiers that were bought four years ago for $21,000. Currently...
Hayden Inc. has a number of copiers that were bought four years ago for $21,000. Currently maintenance costs $2,100 a year, but the maintenance agreement expires at the end of two years and thereafter the annual maintenance charge will rise to $8,100. The machines have a current resale value of $8,100, but at the end of year 2 their value will have fallen to $3,600. By the end of year 6 the machines will be valueless and would be scrapped....
Hayden Inc. has a number of copiers that were bought four years ago for $23,000. Currently...
Hayden Inc. has a number of copiers that were bought four years ago for $23,000. Currently maintenance costs $2,300 a year, but the maintenance agreement expires at the end of two years and thereafter the annual maintenance charge will rise to $8,300. The machines have a current resale value of $8,300, but at the end of year 2 their value will have fallen to $3,800. By the end of year 6 the machines will be valueless and would be scrapped....
Hi all, Can someone please answer this question. Please, list all steps! thanks! Machines A and...
Hi all, Can someone please answer this question. Please, list all steps! thanks! Machines A and B are mutually exclusive and are expected to produce the following real cash flows:       Cash Flows ($ thousands) Machine C0 C1 C2 C3 A –102 +112 +123 B –122 +112 +123 +135       The real opportunity cost of capital is 12%.    a. Calculate the NPV of each machine. (Do not round intermediate calculations. Enter your answers in dollars not in thousands, e.g....
Hi all, Can someone please answer this question. Please list all steps! Thanks! Consider the following...
Hi all, Can someone please answer this question. Please list all steps! Thanks! Consider the following projects: Cash Flows ($) Project C0 C1 D –10,300 20,600 E –20,300 35,525 Assume that the projects are mutually exclusive and that the opportunity cost of capital is 9%. a. Calculate the profitability index for each project. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Project Profitability Index D E b-1. Calculate the profitability-index using the incremental cash flows. (Do...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT