Luke just purchased a tractor for the farm. He will receive free maintenance the first year....

Luke just purchased a tractor for the farm. He will receive free maintenance the first year. After the first year he expects his maintenance costs to be $250 in the second year and then increase by $250 each year thereafter (i.e. $500 in year 3, etc.). How much money should Luke set aside for maintenance costs when he purchases the tractor? The tractor is expected to last 15 years. Assume 5% interest.

Solutions

Expert Solution

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Vadar owned Tatooine Farm. He sold the farm to Luke. Luke never recorded the deed. Vadar...

Vadar owned Tatooine Farm. He sold the farm to Luke. Luke never recorded the deed. Vadar stayed on the property as a tenant for two years. Near the end of the two years, Vadar learned that Luke had never recorded the deed. Vadar advertised Tatooine Farm for sale. Leia negotiated with Vadar for the purchase of the property thinking that Vadar was the owner. Leia also checked the records at the recording office and, finding no reason to question Vadar’s...

A farm purchased a new tractor for $30,000. They estimated the tractor would have a useful...

A farm purchased a new tractor for $30,000. They estimated the tractor would have a useful life of 5 years and would have a salvage value of $5,000. The farm uses the straight-line method and the half-year convention. The farm sold the tractor during year 3 for $19,000. 1. Compute the amount of depreciation expense to be taken in years 1, 2 and 3 Year 1 Year 2 Year 3 2. Prepare a journal entry to record the sale of...

You just purchased an investment at a price of $1250. You will receive $1900 at the...

You just purchased an investment at a price of $1250. You will receive $1900 at the end of 8 years. If the interest rate is compounded semi-annually, what is your yield to maturity? Do not write any symbol (%, $, #, &,...). Express your answers as a percentage. Round your answer to the nearest one-hundredth percentage point. For example, write 12.56 for 12.56%.

Your company just purchased a piece of equipment. The maintenance cost of the equipment is estimated...

Your company just purchased a piece of equipment. The maintenance cost of the equipment is estimated at $1,200 for the first year and it is to rise by $200 each year. How much should be set aside now to have enough to cover for the maintenance cost for the next 7 years? Assume payments are made at the end of each year and an interest rate of 4%.

Green Acres Farms just purchased a tractor on January 1, 2020. The total purchase price (cost)...

Green Acres Farms just purchased a tractor on January 1, 2020. The total purchase price (cost) was $600,000. They expect to use the tractor for 5 years and sell for $100,000. Assume according to MACRS, they can depreciate tractors for 3 years using 150% declining balance. Complete the following depreciation questions. PART A Fill in the economic depreciation table using the straight-line method. Year Remaining value at beginning of year Depreciation Remaining value at end of year 2020 [Q30] [Q31]...

You have just won the lottery and will receive $500,000 in one year. You will receive...

You have just won the lottery and will receive $500,000 in one year. You will receive payments for 25 years, and the payments will increase 4 percent per year. If the appropriate discount rate is 11 percent, what is the present value of your winnings? 5,511,586 $29,258,112 $36,804 $29,258,112 $5,741,235

You have just won the lottery and will receive $1,500,000 in one year. You will receive...

You have just won the lottery and will receive $1,500,000 in one year. You will receive payments for 30 years, and the payments will increase by 2.5 percent per year. If the appropriate discount rate is 7 percent, what is the present value of your winnings?

You have just won the lottery and will receive $610,000 in one year. You will receive...

You have just won the lottery and will receive $610,000 in one year. You will receive payments for 19 years, which will increase 5 percent per year. The appropriate discount rate is 12 percent. Required: What is the present value of your winnings?

Rino just purchased his first car with a 7.5% 5 year mortgage loan of RM78,000. (a)...

Rino just purchased his first car with a 7.5% 5 year mortgage loan of RM78,000. (a) If he pays interest yearly and the total loan will be settled at the end of year 5, how much is his equal yearly payment for the sinking fund which earns 5.2% interest yearly compounding? Assume that the first payment to the fund make immediately. (b) Refer to part (a), if Rino did not pay interest to the lender for the whole tenure till...

Depreciation expense. Richardses' Tree Farm, Inc. has just purchased a new aerial tree trimmer for...

Depreciation expense. Richardses' Tree Farm, Inc. has just purchased a new aerial tree trimmer for $91 comma 000. Calculate the depreciation schedule using a seven-year life (for the property class category of a single-purpose agricultural and horticultural structure from Table 10.3) for both straight-line depreciation and MACRS, LOADING.... Use the half-year convention for both methods. Compare the depreciation schedules before and after taxes using a 40% tax rate. What do you notice about the difference between these two methods?...

Subjects